High demand and low supply will continue to support housing market in 2023, says Centrick

The housing market in 2023 is set to experience only a slight dip, buoyed by continuing high demand and low supply in the property market, despite pressures on buyers caused by the cost of living crisis and mortgage interest rate rises, according to property specialist Centrick.

Centrick’s Market Predictions for 2023 report also explores the future of the housing market in 2023, highlighting areas that look set for a boom in new housing developments, including “vibrant gem” Solihull, Derby and Burton-on-Trent, which is seeing “impressive levels of rejuvenation”.

Birmingham, it says, will continue to soar in popularity for homebuyers and renters thanks to a thriving local economy, strong jobs market, HS2’s planned arrival and the lasting resonance of the Commonwealth Games.

It also states that 2023 could be a good year to invest in property because it “remains a stable investment and a reliable asset class despite possible economic troubles and inflationary pressures”.

Centrick’s report says: “With inflation and interest rates both rising, it’s anticipated that 2023 could see a slight dip in property values but not by as much as you might assume. Overall, the market is expected to remain relatively buoyant for sellers despite the rather negative view many news and media outlets have had regarding the future of the property market.

“This comes as a result of a variety of factors in tandem: increasing fuel costs, hiking energy prices, and a cost-of-living crisis in 2022 have left many prospective purchasers with less to put towards their savings for a deposit, and with lower income available to contribute each month in mortgage repayments.

“However, with the government recently announcing the Energy Price Guarantee, it appears that the short-term worries many homeowners have regarding their energy expenditure may be easinga little. It is also important to note that these price dips are corrections rather than a worrying negative trend.”

There is still high demand and low supply in the property market. January 2022 saw a 15% increase in property enquiries for Rightmove, but the number of listings continues to drop significantly. The Financial Times noted that the start of 2022 saw 350,980 properties on the market across the UK. Although this certainly sounds like a large number, this is a dip of 36% since 2020.

The suspected cause of such a dip in supply is the pandemic, which has added pressure to an already tense discrepancy between supply and demand by halting new developments under construction and putting time pressure on existing chains. With such a lack of supply, property prices continue to rise, and homes are being snapped up faster than ever according to Rightmove. This imbalance looks set to continue into 2023, demonstrating that 2023n could genuinely be a seller’s market, says the report.

September’s mini-budget was warmly welcomed by first-time buyers, who will now benefit from the return of Stamp Duty Land Tax (SDLT) exemptions for the foreseeable future. The changes will make it cheaper to get on the property ladder, as first time buyers will no longer have to pay Stamp Duty on property purchases up to £425,000, helping them save thousands of pounds.

Others will also be able to take advantage of reductions, with 0% SDLT for home movers and 3% SDLT for buy-to-let investors now payable up to £250,000 rather than £125,000, before moving into the higher tax bracket. Stamp Duty cuts greatly stimulated the market during the pandemic and could likely have the same impact again, especially for those looking to purchase their first home.

Centrick believes this will produce a tangible boost for the sales market, which could balance buyer demand with the recent influx of rental demand as 2022’s tenants become 2023’s purchasers. Stamp Duty won’t just impact first time buyers. It will also benefit investors as they will be able to recoup money on their property purchases that could be used to save for their next investment property, or to offset potentially higher mortgage interest costs.

Properties with gardens, balconies and communal areas will continue to grow in popularity. With the UK experiencing more frequent heatwaves, and still reeling from the restrictions of lockdown, the importance of the garden continues to grow. This doesn’t necessarily bode badly for properties that do not come with gardens, as nearby parks and communal facilities in property developments have also become increasingly sought-after features in 2022 and are set to remain popular for 2023.

In the new homes market, space for developments in cities such as Birmingham, London and Manchester is becoming increasingly scarce and expensive. New locations are emerging that present developers, investors and home owners with opportunity. Centrick highlights three key locations that are set to soar in popularity in 2023 in terms of the new homes developments.

“Solihull is a vibrant gem in the West Midlands thanks to its variety of social and arts events, many of which Centrick has been honoured to sponsor. There is a tangible sense of community in Solihull that many new homes developers are seeking to take advantage of. Better still, Solihull offers unrivalled access to Birmingham, with commuters being able to catch a train from Solihull Station to Birmingham Moor Street in the city centre in just eight minutes. The combination of Solihull’s fantastic location and community-driven environment sets it up to be one of the most sought-after towns for prospective new home developments in 2023,” says the report.

“Burton on Trent is set to see impressive levels of rejuvenation over the coming years, with the town’s high street currently undergoing significant development to ensure it is better connected, greener, and a fantastic place to set up a business. What’s more, the commutability of Burton has already solidified its status as a fantastic place to purchase property – whether you need to get to Wolverhampton, Derby or Birmingham, Burton puts you in easy reach.”

Derby is also becoming increasingly popular with buyers, which bodes well for new homes developers seeking out areas to target. In 2020 we reported on a considerable influx in investment targeted at the East Midlands city, with 1,000 new homes scheduled for construction at Snelsmoor Grange, a significant new community spanning over 160 acres in the south of Derby. With this suburban community already gaining popularity, we anticipate that other developers will start to set their sights on the East Midlands for their next development in 2023 and beyond.

And Centrick predicts that Birmingham’s booming local economy, thriving job market and the lasting resonance of the Commonwealth Games will make the new homes market even stronger. With companies such as HSBC, PWC, and Goldman Sachs all placing their roots firmly into Birmingham soil, as well as the restructuring of government departments and the Civil Service seeing a shift away from London, Birmingham is expected to see a drastic increase in employment opportunities.

This is set to build upon the success of the Commonwealth Games, which has produced long-term opportunities for locals, specifically in the sport, tourism and hospitality industries. Better yet, the completion of HS2’s new Curzon Street Station will not only create thousands of jobs but will boost the ease in which Londoners can get to the West Midlands.

Research has indicated that the city will require the construction of over 4,000 homes each year in order to keep up with this predicted soar in population, with demand certainly not showing any signs of waning. Demand is already far outstripping supply in Birmingham, with the average number of new homes built in the city each year sitting at only 900, which is less than a quarter of what is needed to keep up with the magnificent traction Birmingham is gaining.

As a result, Centrick anticipates that the new homes market in the city and its surrounding areas will continue to grow, with developers starting to get plans into action to avoid a housing crisis and take advantage of the unprecedented demand in Birmingham. It predicts property prices across the city could rise by 24.5% over the next five years, with a 14% predicted rise in rents by 2026.

Centrick’s report also looks at the 2023 lettings market. It’s no secret that the lettings market is booming, competition for property is fierce, and prices are on the rise. “The rental market is set to be lightning-fast next year as demand for rental property remains high, making buy-to-let properties a reliable investment for 2023 and beyond. We anticipate that most of our units won’t be available for long before they get snapped up by eager tenants, especially in commuter towns and cities with brilliant job opportunities and exciting lifestyle offerings.”

Meanwhile, rents have increased three times faster in 2022 than in the previous two years, making a jump of 17%. As the lettings market remains buoyant despite the increases, Centrick anticipates that rental costs will continue to rise as demand stays high and supply remains low. For further information on what we predict will happen to the housing market in 2023, and our latest reflections on the current property market, download the PDF below: