19 Jan 2023

Property Prices Rise by 0.9% in January

Category: Property Investment Blog - Tips & Industry News | City Rise

The UK property prices were forecasted to have a slight dip at the start of 2023. Despite this prediction, Rightmove has reported a 0.9% increase in property prices for January.

This signals that the strength of the UK property market is going to continue despite a drop-in market activity. Property market activity took a slight dip due to rising interest rates and the heightening cost of living in the UK. Meanwhile, rental properties are performing exceptionally well. Those affected by rising interest rates the most are first-time buyers, who take advantage of high LTV mortgages. Therefore, they are more likely to continue renting, as Generation Rent is in full effect.

Author: Sam Whalley

Digital Marketing Executive

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Why have Prices Risen?

As a result of the supply-demand imbalance, the need for properties remains higher than at pre-pandemic levels. Therefore, property prices are unlikely to drop. Furthermore, it appears the initial shock of the September mini-budget has subsided and buyers are less anxious about securing their next property.

Although interest rates rose, they have started to decline again, as lenders have had time to assess the risk of lending. The drop in interest rates has brought forward a lot of serious buyers and encouraged homeowners to get their property valued. In fact, Rightmove reported an impressive 55% higher volume of enquiries.

Will Prices Rise Further?

Early indications are positive for property prices in 2023. However, it is too soon to be certain whether prices will further increase. In the 2023 property market forecast, it was suggested prices could drop by 2% in 2023, primarily at the start of the year. Nevertheless, the current property price growth indicates that this may not be entirely accurate.

Additionally, as interest rates begin to decline, the market should become more active. The Bank of England’s base rate is currently sitting at 3.5% which indicates 5% should be the average rate. However, lenders have started dropping rates as inflation settles back to pre-pandemic levels. It is expected that in 2023, interest rates could drop below 4% which will allow a lot of potential buyers back into the market.

What Does This Mean for Investors?

For investors looking for capital gain throughout 2023, this is a positive sign. While a 0.9% price may not sound substantial if this growth continues it could result in a 10.8% year-on-year increase. If a property is currently valued at £200,000 that could mean an extra £20,000 of capital appreciation over one year. While this is not a matter of fact, in 2022 house prices across the UK raised by 8.2% on average.

However, some investors will be looking to benefit from the high rental demand. This is achievable as potential first-time buyers are currently priced out of the market. This leaves many people looking for high-quality rental accommodation. Therefore, rental prices will continue to climb throughout the year.

CityRise Verdict

Overall, the recent news is positive news for the property market. As prices were expected to decrease by around 2% in 2023, early growth indicates this may not be the case.

The reasons for property prices rising in January 2023 are:

The supply-demand imbalance is still uneven.
Buyers are less anxious as the property market normalises.
Mortgage lenders are relaxing their mortgage rates.

For investors this means:

They could see considerable capital appreciation in 2023 if growth continues.
First-time buyers may turn to rental properties, causing rents to climb.
As interest rates fall from lenders, they could gain a larger return on investment.

Prices should continue to rise if: