Chestertons’ forecast predicts that prices across England and Wales will drop by around -1% in 2023, compared to a drop of -3.2% in London. The capital will then lead the recovery in 2024, with prices rebounding by 9%, compared to a smaller increase nationally.
The agency doesn’t believe that prices will fall substantially as it thinks the strong underlying demand for homes combined with fewer-than-expected forced sales will cushion prices. Instead, it expects that many homeowners will adopt a ‘wait-and-see’ approach for the first half of 2023, which will reduce the number of property sales that take place. It is anticipated that this lack of activity will cause a high degree of ‘buyer frustration’ in the second half of the year which, when released, will support the rapid price growth they expect in 2024.
Sebastian Verity, Head of Research, explains: “We expect 2023 to be characterised by a slower property market during which around 25% fewer properties will come onto the market and change hands compared to a ‘normal’ year. The government is actively working with mortgage lenders to avoid additional stress on borrowers so we believe the number of forced sales will be relatively small and the lack of supply, combined with the strong underlying demand for homes, will ultimately insulate the market from any dramatic falls in prices.”
Matthew Thompson, Head of Sales, adds: “We are already seeing signs of supply tightening across the London property market, with a -30% drop in the number of people requesting valuations of their properties in the last three months of 2022. As supply and activity continue to fall going into 2023, we believe this should counteract the majority of the downward pressure on house prices.”
Chestertons expects that London’s prime property market will outperform the mainstream market for the next 18 months due to its status as a relatively safe asset and its continued appeal to international investors. It is predicting prices in this segment to rise by 5.7% in 2023 and a further 3.5% in 2024.
Lettings in 2023
Reviewing the lettings market, Chestertons advises that the disruption caused by Covid to the supply of rental properties is still ongoing and the number of available rental properties in London is still falling, albeit at an increasingly slower rate going into 2023. However, it believes that more properties are now becoming available and that affordability pressures are placing an effective cap on tenants’ budgets. This is helping to rebalance London’s rental market and reduce the pace of rental price growth. It forecasts rents to continue to grow by up to 5% over 2023, before plateauing in 2024.
Richard Davies, COO of Chestertons, concludes: “Covid had a major impact on the natural cycle and operation of London's rental market with lockdowns restricting tenants’ movements and their ability to move, artificially cutting supply and extending the average rental property’s time on the market which impacted on pricing.
"The aftershocks of this interruption to the normal market are finally ending and we believe that London’s rental market is now showing signs of slowing down, with more rental properties coming onto the market and an increasing number of landlords prepared to reduce the amount of rent they ask for.”
