As a direct result of the UK’s current cost of living crisis and mortgage interest rates increasing at the end of 2022, the interest in purchasing property has undoubtedly dwindled in recent months. People are finding it more difficult to save money for deposits, people are wanting to hold off getting a mortgage until interest rates come down a bit more, and others simply don’t want to add the financial commitment of a property and a mortgage on top of an already stretched budget. In previous years, the property market in the UK has boomed with competition and bidding wars for properties pushing the average sale price in the UK to a staggering £290,000 in 2022. But, recently released data from RICS (Royal institute of chartered surveyors) shows that house prices were down across all regions of the UK in the first month of 2023.
Why Are House Prices In The UK Coming Down?
Over recent years, house prices in the UK have increased exponentially due to several factors.
- Lack of space, so lack of property.
- Lack of new homes being built.
- An ageing population, so people are living in their homes longer and properties coming to the market are becoming less frequent.
A combination of these three things and other reasons has meant that there had been more people competing to purchase properties when they did enter the market. One property could have 10 different people making offers on it for example. This has meant that sellers could afford to pick and choose which offer they accepted and could benefit from selling their property for more than it was worth, due to desperate bidding buyers.
In 2023, sellers no longer have that luxury. As we have already mentioned, house prices were down in January 2023 across the entire UK and have been steadily decreasing since the end of 2022. This is mainly because the competition for property is not as high as it once was. Potential buyers are not as hungry to purchase as they were before the economic crisis in the UK, and a lot of people are wanting to ‘wait and see’ what happens before committing to purchasing.
RICS, who are the professional body responsible for valuing and surveying property in the UK, regularly carry out research around house price trends. In their latest report they have found that house prices were down significantly across the entire UK in January. The most impacted regions being the East Midlands and South East. RICS have found that the number of agreed sales has also dropped significantly, confirming that the appetite for purchasing still hasn’t recovered from the shock of the economic crisis yet.
With House Prices Down, Is Now A Good Time To Buy?
Buying a property now while prices are dropping could be a good for someone looking to purchase, especially a first-time buyer. Although the average price of a property in the UK is still quite high, first-time buyers may be able to snap up a good deal on a property that they wouldn’t have been able to afford this time last year. It could also mean that first-time buyers could save on deposits too as a lower purchase price will mean a lower deposit.
However, you should always talk to an estate agent and a mortgage broker before making any rash decisions on property, no matter how appealing the price might be. As house prices drop, there could be a risk of being left in negative equity. That means that you could for example purchase a property for £250,000 with a 90% mortgage at £225,000. And if property prices continue to drop over the next couple of years, the value of your property could in a worse case scenario, drop below £225,000 meaning that you owe more to the bank than your house is worth. Leaving you in negative equity.
I’m Interested In Buying A House In 2023, Where Do I Start?
With the help and guidance of a mortgage advisor. Chances are that you will probably need the assistance of a mortgage to purchase a property, so the best place to start is by talking to a mortgage advisor before viewing any properties. A mortgage advisor like Oportfolio will be able to go through your income and your outgoings with you and will be able to determine exactly how much mortgage you are able to borrow and exactly what house price you can afford. So if you are looking to potentially buy in 2023, give us a call today for a free initial mortgage consultation with one of our experts.