The new year looks set to bring a shift in the housing market, with the days of soaring house prices and cheap mortgage rates consigned to the past.
People looking to buy their first home or progress up the property ladder will face a slower market and higher borrowing costs, while those who decide to stay put in their current home will encounter more expensive rates when they come to remortgage.
In truth, there's no definitive 'good' or 'bad' time to move house, but by doing your research you can reduce the likelihood of making a financial misstep. Here, Which? analyses the pros and cons of upping sticks or putting down roots in 2023.
Should I buy my first home in 2023?
Buying your first home is one of life's biggest (and most expensive) decisions.
Here are some of the key things prospective first-time buyers need to know.
House prices are expected to fall
After years of rises, we're expecting to see house prices fall in 2023 as the the cost of living crisis and higher mortgage rates impact on the housing market.
Experts predict prices will fall, but by how much is the source of some debate. Rightmove, for example, thinks values will drop by 2%, but Savills forecasts a fall of 10%.
As a prelude to 2023, data from Halifax shows average prices fell by 2.3% in November, the largest monthly drop in 14 years.
- Find out more: what's happening to house prices?
High mortgage rates may damage affordability
Cheaper house prices are theoretically a good thing for homebuyers, but the high mortgage rates that have blighted the market in recent months look set to remain in 2023.
A survey by the Building Societies Association (BSA) found mortgage affordability to be the biggest barrier to buying a property.
Even the cheapest deals are now priced just below 5% - a far cry from the record lows recorded in late 2021. Rates may fall in 2023, but significant drops are unlikely.
In the short term, much is dependent on any changes to the Bank of England base rate, which may rise for the tenth time in a row in February.
Saving a bigger deposit could unlock more options
It's possible to get a mortgage with a 5% deposit, but buyers who can put down a bigger deposit will find it easier to get on to the property ladder.
A larger deposit makes you a less risky prospect to mortgage lenders and, as a result, they'll generally offer you lower interest rates on your borrowing.
Even being able to stretch from a 5% to a 10% deposit can have a significant effect on the number of mortgage deals available to you and the rates you'll be able to get.
Having a bigger deposit will also protect you from the threat of negative equity - where house values drop and your property is worth less than the amount you owe on your mortggae.
- Find out more: how to save for a mortgage deposit
A slower market could mean more room to negotiate
According to the BSA, just one in seven people think now is a good time to buy a house, one of the lowest confidence ratings recorded in the last 15 years.
As a result, demand for property purchases will be lower in 2023 than in recent years. UK Finance predicts sales will decrease by a fifth compared to this year.
With fewer people vying for each property, buyers could have the upper hand in negotiating better deals.
According to property portal Zoopla, 11% of homes have had their price lowered by more than 5% since September.
- Find out more: making an offer on a house or flat
Should I move house in 2023?
Whether you're a second-stepper or a downsizer, moving home can be a great decision or an expensive mistake.
Before rushing in, consider the following factors.
Falling house prices aren't the end of the world
We've already mentioned that house prices are likely to fall, but this shouldn't necessarily put you off from moving home.
The key thing to remember is that although prices are dropping, they're doing so from a very high point.
Figures from Halifax show the value of an average UK home is currently £46,000 higher than in March 2020.
Ultimately, this means that even if prices drop by 10% , they might only return to where they were a year or 18 months ago.
You'll need to set a realistic asking price
Data from the estate agent body Propertymark shows falling demand resulted in 72% of properties in November selling below the original asking price.
That figure is in stark contrast to March, when only 15% of properties sold for less than the asking price in a soaring market.
Buyers look likely to hold the upper hand in 2023, and this means sellers will have to be both realistic and patient.
The chart below shows how houses are already beginning to take longer to sell.
Moving costs may be more than you think
If you're taking your next step up the property ladder, you'll need to factor in the various additional costs of moving home.
Figures from Reallymoving show the average cost of moving is now £14,000, up from £12,000 in 2021.
Stamp duty costs are the main outgoing, averaging £6,500. Estate agent and conveyancing fees also left movers out of pocket, with both rising considerably in the last 12 months.
Should I stay put in 2023?
During periods of economic uncertainty, biding your time and putting off major life decisions like moving home may be a sensible option.
The market will stabilise in the medium-term
The forecasts may look bleak at the moment, but it's likely that house prices will start to pick up again in the medium term.
Savills predicts values will start to recover at some point in 2024, with average house prices rising by 6% over the next five years.
If you're planning to stay put, see our guide on what to do when you need to remortgage to ensure you get the best possible deal when your fixed term expires.
Making green renovations could be a savvy move
As well as lowering your running costs, energy-efficient improvements may also increase the value of your home.
Well-insulated homes with high Energy Performance Certificate (EPC) ratings are becoming increasingly desirable to buyers.
The government is targeting that all homes will have a minimum EPC rating of band C by 2035. The current average is D.
Mortgage lenders are also looking for ways to make their lending books greener. Some banks and building societies already offer preferential rates for people buying energy-efficient homes, or existing customers borrowing extra cash to make green improvements.
- Find out more: Energy Performance Certificates explained
source https://www.which.co.uk/news/article/property-in-2023-should-you-buy-sell-or-stay-put-aRfzI9p1FPiE