The UK housing market continues to be in a state of flux. With prices still high, demand remaining strong, and supply being limited by land availability, the sector has been under pressure for some time. The government’s “help to buy” program, which offers tax breaks on new properties purchased with mortgage cash, was instituted in order to stimulate home ownership in the country. However, the incentives have fuelled price inflation in many popular markets. With demand for new homes still extremely high, it’s likely that we’ll continue to see significant growth in the UK housing market over the course of this decade. However, there are indications that it will be less dramatic than in previous years. Additionally, the sales may be impacted by more restrictive lending practices due to rising home prices. With that said, let’s take a look at what’s happening in the UK housing market around 2023.
Property prices may decline sharply
With demand high and supply limited, prices in the UK real estate market are expected to fall sharply. The average price of a home is forecast to drop by 10% in real terms over the next decade. So, if you are planning on selling your property, you may consider getting a free property valuation in Bracknell to find out its actual worth.
With fewer properties currently on the market, demand is expected to fall by an additional 15%. This may have an impact on sales as well. While this may seem like good news for those looking to purchase property, the decline in price is forecast to be dramatic. For example, average property prices in London are expected to fall by as much as 45% in real terms.
In order to limit declines in prices and maintain demand, the government has implemented a number of measures to stimulate demand and support the housing sector. In particular, the “Help To Buy” scheme gives first-time buyers a government-backed loan of up to £200,000 for new-build homes. This has been effective at stimulating demand and helping keep prices high.
Demand for housing will remain high
The largest factor driving demand for new homes in the UK is likely to continue to be the growing population. People are migrating to the country in order to find work, and many are settling there for the first time. As a result, the number of households is expected to increase by nearly 270,000 over the next decade. Over the same period, the number of people looking to move to the UK is also likely to rise by 230,000.
However, economic factors could have a large impact on the pace of growth in the housing market. In particular, rising interest rates have made mortgages less affordable for many potential buyers. In response, the Bank of England has been hiking rates to reduce household debt and make mortgages more affordable. At the same time, growing sentiment towards renting could also affect demand for residential real estate.
House price growth may slow in the long term
The most significant factor contributing to the future growth of the UK housing market is likely to be the drop in house prices. This could have a significant impact on demand and change the nature of the market. There are a number of factors that could lead to a decline in house prices, including new restrictions on lending. These restrictions may result in fewer new homes being built, which could dampen demand. And at the same time, it’s possible that a housing market correction is needed to maintain sustainable growth. Further, factors like rising interest rates may also have an impact on demand in the future, just as they do now.
The market may cool down
Among others, the crucial factor likely to limit the growth of the UK housing market is a potential decline in demand. Over the next decade, it’s likely that the decrease in house prices will cause the demand for new homes to decline. This could have a significant impact on the market, as fewer buyers enter the market and drive up prices.
New lending standards implemented by the Bank of England in response to high prices could also dampen demand. Banks are being encouraged to reduce the amount of money being lent to property and make homeownership less attractive. At the same time, it’s possible that the decline in house prices will encourage more people to purchase properties. In addition, changes to the tax system and the introduction of an updated land registry system could impact the market.