Buying a house in 2023
Figures show that house prices are starting to fall. This decline is expected to continue in 2023. There are several reasons for this: Interest rates have increased from their record lows since the end of 2021, making mortgages more expensive and reducing demand in the housing market. But the real question is: Is 2023 the best time to buy a house in the UK?
Key takeaways from this article:
- Ending the year in recession, the UK’s housing market is experiencing some atypical circumstances.
- There are several reasons to consider buying a home during recessions - the two main reasons are less competition and lower prices.
- There are also several potential drawbacks, like sky-high interest rates, a floor on pricing decreases and potential income changes because of the recession.
Are we in a recession?
The Bank of England believes the contraction of the economy marks the start of a prolonged recession that will last for the whole of 2023, not 2024 as an earlier version said. That said, the economy is not out of support. Households have room to save a smaller share of incomes; on some measures, they have yet to dip into the £200bn-plus of excess savings accumulated during the Covid pandemic. Consumer spending is therefore unlikely to fall to the same extent as real incomes. And falling inflation over the course of next year offers hope of a return to growth later in 2023
Pros of buying a house during a recession
Some of the pros of buying a house during the coming months, whether we get the recession label or not, include:
- Potential decrease in home prices.
- Lower likelihood of getting into a bidding war.
Home prices may decrease.
Halifax said that between the start of the pandemic in March 2020 and August this year, the average UK house price had increased by £55,000, almost 23%, to a record high of £293,992.
The bank said the 8% drop forecast for next year equated to the value of a typical UK house in April last year, meaning homeowners would not see all of their pandemic gains wiped out. In 2023 Zoopla forecast expects that UK house prices would fall by about 5%. Not all markets will experience losses, but if you’re house hunting in an area that does, buying over the next year could mean a lower sticker price.
You’re less likely to get into a bidding war
Madness ensued during the pandemic housing craze. Not only were buyers getting into outrageous bidding wars, but they were also forgoing smart buying practices, like demanding an inspection before purchase.
Luckily for buyers, these bidding wars have cooled. That doesn’t just mean that you’re less likely to pay above-market prices for a home
Cons of buying a house during a recession
There are some potential cons of purchasing a home at the current moment, too. They include:
- High current mortgage interest rates
- A floor on price decreases
A recession doesn’t automatically mean lower interest rates
If we’re in a recession right now, we’re experiencing one where rates are higher than they were previously. Rising interest rates are a major contributor to the housing market’s cooling. Because inflation is still so high, we’re not seeing the lower interest rates that typically come alongside a traditional recession.
The housing market currently has a floor.
Home prices are anticipated to decrease over the next year, but there is a floor. Most economists are not predicting a 2008-style crash. A large reason for this is that there’s simply not enough affordable inventory. The issue isn’t that Brits don’t want to buy homes. The issue is that they cannot afford to do so.
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