Timing the property market in the UK, especially in 2023, is a complex endeavor, fraught with challenges for both buyers and sellers. The real estate market’s sluggish nature adds a layer of uncertainty, making it difficult to predict whether it’s the right time to make a move. This uncertainty affects everyone, from individual residential buyers and sellers to housebuilders and real estate investment trusts (REITs).
For individual buyers and sellers, a property often represents a long-term investment or a place to call home. However, the drawn-out process can result in overpaying or underpaying for an asset due to market fluctuations occurring after an offer is made. On the other hand, housebuilders and REITs face even more uncertainty. They develop assets with the expectation of selling them in a market that could look drastically different from when they initiated their projects.
Stock market investors enjoy better liquidity but still grapple with the challenge of determining the opportune moments to buy or sell property-related stocks. The key question remains: when is the right time to enter or exit the market? Unfortunately, there’s no crystal ball for precise predictions, and individual property shares have their unique valuation metrics.
To gain insights into the market’s overall direction, experts rely on various indicators and historical knowledge, especially from previous market downturns. One possibility that should be considered is that house prices may not plummet as predicted by some. The Joseph Rowntree Foundation suggests that a freeze in the housing market could occur. High interest rates and elevated prices might render potential buyers unable to afford new properties, while low unemployment could mean that many sellers are not in a hurry to sell.
Nevertheless, predictions of declining house prices abound. Analysts from Nomura forecast a 15% drop by mid-2024, while Savills and Lloyds predict a 10% decrease in 2023. Knight Frank, another agency, foresees a 10% fall over both 2023 and 2024. Estate agents on the ground, although typically inclined to paint an optimistic picture of the market, have shown pessimism in anonymous responses to surveys like the Royal Institution of Chartered Surveyors (RICS) housing market survey. This survey tracks the percentage of surveyors reporting price rises and falls and currently indicates a gloomy sentiment among estate agents.
However, the size of the impending fall in house prices remains uncertain. The challenge lies in the nature of available data. The Office for National Statistics (ONS) dataset, the most reliable source for national property price information, lags behind by two-and-a-half to three-and-a-half months, making it challenging to assess the market’s real-time status. As of the most recent available data, house prices grew by 9.8% for the year ending in December 2022, with a monthly dip of 1.65% from November.
In conclusion, timing the UK property market in 2023 remains a formidable challenge, as there is no foolproof way to predict market movements. A comprehensive assessment of a range of indicators, coupled with insights from past market downturns, can provide a more informed perspective. Importantly, it’s crucial for individuals to consider their unique circumstances and long-term investment objectives when making decisions in the property market. While predictions of falling prices persist, the possibility of a market freeze should also be acknowledged, making thorough analysis and prudent decision-making paramount.