2022 has been a year full of ups and downs in the property market nationally and locally in Southampton. Some changes have been anticipated whilst others have shook the market more than anticipated. We look back at the year that has gone and ahead for what awaits in 2023.
The last couple of years have been particularly strong in the property market with prices increasing month-on-month and year-on-year. Much of this has been attributed to the lack of housing stock and low interest rates, but most people have been aware this trend could not last indefinitely. It’s therefore been easy to forget that the last couple of years have been an exception to the trends normally observed . As we now near the end of 2022, the issue of housing stock still remains, but the situation for interest rates have changed drastically. What does this mean if you are currently on the market or looking to sell?
We have looked at how the property market in Southampton has fared since the first mini-budget in September both for sales agreed, available stock and properties that have had their prices reduced. This can be summarised as following:
- The market has slowed down in Southampton based on the number of sales agreed, properties that have had a price reduction and properties available on the market compared to the same period in 2021.
- This mean we see a slight uplift in property stock coming to the market, but more property failing to sell at their guide prices and needing price reduction.
- These are general trends and readers should remember that every property needs to be considered individually as some properties will fare different to how the rest of the market is moving.
What are the issues buyers and sellers are facing?
- Increased interest rates are one of the most obvious points. An increase in interest rates was perhaps not unexpected, but the rapid increases we have seen in 2022 have taken many by surprise. This combined with record-high inflation means the monthly cost of borrowing and running a household has increased substantially. This leaves not only buyers who cannot afford to move, but also buyers/sellers alike who chose not to move despite being able to absorb the cost. The Bank of England has forecasted that interest rates will continue to grow into 2023 before they start declining. A decline will however not bring interest rates down to any levels we have been used to in the last couple of years, so this is a factor buyers, sellers and estate agents must factor in for the time to come.
- Lack of access to mortgages is also an important factor in the slow-down we are experiencing. Many prospective buyers who have had agreements in principle have found out upon acceptance of their property offers that their AIP are not being honoured. We have seen many qualified buyers suddenly left without mortgage access. This was most prominent after the September mini-budget, but the fact that mortgages will be harder to get at an affordable rate or at all is likely to continue into 2023.
- Unrealistic pricing still happens. Many agents continue to value properties purely based on comparables of similar properties that sold 6-12 months ago and ignore the shifts we have seen in the market since. Although it might feel bitter as a seller to go on the market for less than what your neighbour sold for in January – the reality is that we need to accept that prices will flatten out and decrease somewhat. The alternative is to sit on the market for an extended period with no guarantee of a successful sale. Be realistic about the market value of your home and ensure the price an estate agent quotes you is backed up by evidence.
What does 2023 hold?
There are many moving factors happening in the market and the economy as a whole which makes predicting 2023 difficult. However, the Bank of England and many reputable mortgages providers have forecasted property prices to fall alongside an recession in the economy.
Where we previously would have expected prices to stabilise, we expect property prices to decrease somewhat in 2023. The lack of available housing stock will continue to play an important role in how the market in Southampton fares – for example, properties in a certain price segment in popular areas for families such as Bitterne, Woolston, Upper Shirley and Freemantle to mention a few – are likely to continue to be sought after. As long as they are priced correctly and we do not see further hurdles for buyers accessing mortgages, we would not expect these type of properties to see huge falls in their value.
What are the good news?
It’s easy to feel that much of the current picture is doom and gloom. However, there are a few stories worth noting.
- Property prices are at a record high – most sellers are likely to have built up equity given how the market has been. People who have recently bought whilst the market has been booming will probably still see an increase in their property value when they do go to sell (based on people staying in the property for 3-5 years before selling).
- Lenders will from 2023 be able to consider mortgages on properties that have previously required an EWS1 certificate. This is great news for first-time buyers and other non-cash buyers who have not been able to buy for example – city centre flats. This move will help alleviate some of the housing stock issues previously seen in the market as it opens up a wider buyers-pool. You can read more about this change here: https://www.ftadviser.com/mortgages/2022/12/21/lenders-to-offer-mortgages-on-flats-with-cladding-under-new-guidance/