March property market analysis

With 2023 well underway, a pattern is emerging for this year’s property market. While house price reductions may sound alarming, they’re minimal and against a backdrop of unusually high appreciation. In fact, Halifax recently revealed that at national level, prices have risen £48,620 since the beginning of the pandemic.

Looking at short-term trends, prices have now fallen for six successive months. February’s decrease – a drop of -0.5% – leaves the UK’s average house price at £257,406. This fall, however, equates to just £891 being knocked off an average property’s price.

Slightly cheaper to buy in 2023

When evaluating prices on a year-on-year basis, the figures are really quite subtle. Halifax’s statistics show that between February 2022 and February 2023, values fell -1.1%. Although it’s the first annual decline in prices since June 2020, the average home has only become £2,824 cheaper in the last 12 months.

Dramatic price reductions not noted

Rightmove has been monitoring house price fluctuations, claiming it has not seen the significant price falls that some were predicting. In February, the portal also said new sellers hadn’t been increasing asking prices and values flat lined as a result. Rightmove’s average asking price is now £362,452 – a rise of £14.

It says values have been holding steady because there’s a continuing shortage of properties for sale, coupled with less competition than a year ago. Although there are still more buyers than properties, the market is rebalancing quickly. The number of homes for sale is up 48% on the levels seen in 2022.

There’s additional good news for sellers. Rightmove has noted that the number of potential buyers making enquiries to estate agents rose 11% in February’s first two weeks, when compared to the same period in 2019. This dovetails with average mortgage rates reducing –  rates that peaked after 2022’s mini Budget are now falling.

While the cost of buying a house has, theoretically, become marginally cheaper, rents have started to rise again. The latest HomeLet Rental Index is a good barometer, reflecting activity in February 2023. The figures revealed the UK’s average rent had become +0.3% more expensive over the past four weeks.

In February 2022, rents were £1,064 per month, on average, but the cost has climbed by +10.2% since then. Now, the average UK rent is £1,175 per month. HomeLet says rent rises may continue, unless there is an increase in properties made available.

Renters resigned to staying put

A new survey of tenants by Finbri found that while 83% would like to own their own home, 75% don’t think it will be possible in 2023. As well as rising rents, tenants are pessimistic about their buying chances for a number of reasons. Not having a deposit (53.82%), high mortgage rates (32.37%) and an inability to secure a home loan (22.76%) were all cited as reasons a purchase wouldn’t happen.

Additional reasons included the cost of conveyancing fees (15.26%), waiting for interest rates to reduce (14.74%) and an inability to afford stamp duty (11.84%). Those who are delaying a purchase may find they will pay more rent in the future. The Finbri survey also found 52.75% of landlords plan to raise rents to cover increasing costs.

Increase in EPC-friendly rentals

Of the rental properties that are available, more possess an impressive EPC rating. When analysing its data, Paragon Bank discovered a 44% increase in lending against rentals with an A-C EPC. Indeed, there are now more properties with an EPC between A and C in the private rented sector than in the owner-occupier market.

The increase in eco-friendly rentals can be attributed to incoming Government legislation, with many landlords choosing to buy energy efficient investments rather than make improvements to poorly performing properties. As of 2025, all newly tenanted properties will need an EPC of at least a C. This will extend to existing tenancies from 2028.

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