Over the past few years, home prices have risen rapidly. The average price of a home in England was £316,073 according to the most recent UK House Price Index from HM Land Registry, which is more than 20% more than it was at the same time two years ago. Although this expansion has been great for the market, it was always going to cease, and several predictions for the coming year reflect this.
According to JLL's UK Residential Forecasts, prices will decline by 6% in 2023. This sentiment is echoed by Savills in its Residential Property Market Forecasts, which predict a 10% decrease in prices across the UK.
These numbers appear alarming on the surface, but when you consider the exponential growth of recent years, this price drop is actually more of a market correction than a crisis. Furthermore, both forecasts predict that house prices will rise in the years that follow, reaching an 8.2% increase in the 2023–2027 period according to JLL and a 6.2% increase in the same period according to Savills.
Despite a slowdown in home price growth over the next year, rental prices in the UK are projected to rise sharply through 2023 and beyond. The aforementioned predictions predict that rents will rise by 4.0% (JLL) and 10% (Savills) each year until 2023, with cumulative growth of 15.9% and 18.3%, respectively, in the years 2023–2027.
Is 2023 the year for property investment?
The predictions made above suggest that 2023 will be a great year to make real estate investments. Investors will be able to profit from reduced price points as house prices decline during the year, and since house price rise is expected to return in 2024, investors will have the opportunity to gain from rapid capital growth in the following years.
Because renting is becoming more and more popular and in demand among the younger generation, rental values are also growing steadily. In other words, investors will profit from rising rental returns throughout the year and beyond, collecting a steady income while their property's value rises.