Whether average property prices will fall by 10% or see further growth in 2023 remains to be seen. Depending on whom you ask, the next 12 months could see just about any eventuality become a reality for the UK housing market.

But what is safe to say is that when looking at the state of play today, there are several current trends set to influence the housing market in 2023.

Down valuations on the rise

The growing prevalence of ‘down valuation’ has been wreaking havoc on property transactions across the UK for much of this year. This is where surveyors place a value on a property that is less than its asking price, typically resulting in disputes between lenders and sellers while making it more difficult to close sales.

“As markets change, we can probably expect this difference in opinion to widen,” comments John Baguley at Countrywide Surveying Services.

As far back as the summer, many brokers reported encountering valuations that were as much as 20% lower than agreed property purchase prices, bringing major complications and conflicts into the negotiation process.

“There is a gulf between the reality of what buyers are willing to pay and what surveyors are willing to let go through,” said Jonathan Hopper of Garrington Property Finders.

This is one of many areas in which bridging finance could come into play as a potential solution, enabling buyers to sidestep the usual complications.

“In 2022, the most common use of bridging finance was to overcome a property chain break, surpassing its use to buy investment property,” said Stephen Clark

“We anticipate this will continue into 2023, as down valuations restrict homebuyers’ options, together with falling house prices, rising interest rates, and the cost of living.”

Auctions on the up

The popularity of auction property purchases has been gaining pace throughout the year as mainstream buyers and investors seek affordable homes and commercial properties via non-conventional channels.

Bridging finance provides buyers from all backgrounds with the opportunity to compete directly with cash buyers, enabling the completion of fast transactions while beating rival bidders to the punch.

“We have seen rising demand from auction buyers for bridging finance, enabling them to move at speed with flexible terms,” adds Stephen Clark

“Again, we expect this pattern to repeat itself through 2023 as more properties come up for auction.”

Total bridging loan volumes continue to hover around all-time highs, likely due to the fact that average monthly interest rates remain historically low.

“Some brokers are offering rates below 6% (annually), whereas the Halifax headline rate is above 6%. Bridging loans are extremely competitive at the moment,” commented Vic Jannels on behalf of the ASTL.

A quoted annual rate of 6% on a bridging loan would equate to 0.5% per month, leading up to a uniquely cost-effective facility when repaid promptly.

Putting the brakes on the chain breaks

Avoiding or repairing broken property chains has become the number-one use for bridging finance in the UK for the first time this year. For a broad range of reasons, homebuyers are turning to fast-access bridging loans to enable them to complete planned transactions in time-critical situations.

“Borrowers who have had mortgage products withdrawn with little or no notice or have lost their sale due to their buyers no longer fitting mortgage affordability criteria have turned to short-term funding solutions to ensure their purchase can go through as planned,” says bridging finance expert Stephen Watts.

Following several consecutive years at the top of the table, purchasing investment properties fell to second place in the rankings. Having accounted for 24% of all bridging loans issued in Q2, just 16% of transactions completed in Q3 were for investment property purchases.

After more than two years of record gains, average UK house prices are now predicted to fall in 2023. But while this may buck the trend of the past couple of years, the likelihood of a major crash remains low.

Even in the face of growing economic uncertainty and an unprecedented living-cost crisis, demand for quality homes in desirable areas of the country remains strong.

October brought the first decline in average UK house prices in 28 months, according to data published by the Royal Institution of Chartered Surveyors. The same survey also found that house price expectations among market watchers and analysts also slumped for the first time in over a year.

Experts now believe that a decline of around 4.7% in average house prices will creep into the equation by the end of next year. This will mark the first annual drop recorded in over a decade and comes in stark contrast to the enormous annual house price gains collected over the past couple of years.

But as average house prices increased by almost 6.3% in 2022 alone, the declines forecast for next year are unlikely to have a huge impact on overall affordability.

“There is a rebalancing, but nothing like we saw after the global financial crisis. Supply is still relatively tight, so that is helping support prices,” said Chris Druce at estate agency Knight Frank.

Data from the Land Registry suggests that while average UK property prices fell by approximately 19% during the last global financial crisis, they have since doubled.

Supply issues continue to fuel higher prices.

Several major UK housebuilders have indicated that they have built fewer homes this year than originally planned, due largely to supply chain issues and escalating costs.

Taylor Wimpey Plc said that its housebuilding targets for 2022 would not be met, while Persimmon Plc has predicted 2023 land additions to be lower than in 2022. These and other factors will continue to affect the availability of housing across the UK, fuelling high prices.

Looking further ahead, 2024 is predicted to bring a slight increase in overall property prices: total annual gains of around 1%. After which, a further 3.5% increase has been forecast for 2025.

As polled by Reuters, experts believe that while a housing market crash cannot be ruled out of the equation, the more likely scenario is a correction. More than half of those polled said that the possibility of a crash remained high for the time being but that its impact would not be quite as severe as those experienced in the past.

“We see a one-year correction in 2023, with the economic performance and job numbers a little better than expected. 2023 will be a very difficult year, but life will feel semi-normal in 2024,” said Tony Williams at consultancy Building Value.

Even so, analysts have such wildly differing opinions on what will happen over the next 12 months that forecasting anything with even a slight degree of certainty is almost impossible. In London, experts believe that anything from a 12.5% drop to a 4.0% rise in average house prices could be recorded next year.

“Prices have continued to fall in London due to exacerbated affordability issues. New builds are also likely to plummet in London as build cost inflation and reduced development finance start to bite,” said Mark Farmer at Cast Consultancy.

In what Cambridgeshire Police have called a “truly brazen crime”, a private tenant has been jailed for attempting to sell the home he was renting in order to make off with the proceeds.

41-year-old Andrew Smith moved into the three-bedroom home in Cambridge in early 2020, only to list the property on the market just two weeks later. The listing was published via a non-existent online estate agent in the hope of tricking a desperate buyer into a quick sale.

And he almost succeeded, with one interested party coming dangerously close to handing over £400,000 for the property he didn’t even own. The price was agreed, and the sale was on its way to being finalised when an inspection by the buyer (accompanied by a drain surveyor) prompted suspicion.

After speaking to neighbours who said they were almost certain the house was being rented to its current occupant, he called the police. The subsequent investigation found that M upon. Smith had even rented furniture to stage the property for viewing by prospective buyers in order to sell it faster and for a higher price.

He was detained in Bedford and accused of engaging in money laundering and fraud by false representation. Having helped turn a quick profit at the expense of an unsuspecting buyer, Mr Smith was sentenced at Brighton Magistrates’ Court to two years and six months in prison.

“This is an almost unbelievable and truly brazen crime, which saw an innocent buyer almost part with more than £400,000 for a property that was never for sale in the first place,” said Detective Constable Dan Harper.

“The investigation has been long and detailed, and we have worked tirelessly to make sure justice has been served.”

A stark warning

Despite having been labelled an “almost unbelievable” crime, the prevalence of these types of incidents has been growing across the UK for some time. In particular, rapidly rising levels of “title fraud” are prompting homeowners in record numbers to register for property alerts with the Land Registry.

Incredibly, research suggests that as many as 97% of homeowners face the threat of their properties being sold illegally, without their consent or their knowledge.

From 2020 to 2021, the Land Registry recorded a 300% increase in the number of people registering for property alerts. According to new information released by Third fort based on a Freedom of Information Act request, more homeowners than ever before appear to be taking title fraud seriously.

But even now, a mere 515,000 property owners have so far registered for the service, which is provided 100% free of charge in England and Wales. This equates to just 2.5% of all property owners, suggesting that almost 98% face the very real risk of falling victim to title fraud.

As explained on Gov.co.uk:

“We will send you an email alert each time there is significant activity on the property you are monitoring, such as if a new mortgage is taken out against it.”

“The alert will tell you the type of activity (such as an application to change the register or a notification that an application may be due), who the applicant is, and the date and time it has been received.”

“Not all alert emails will mean fraudulent activity. If you don’t think the alert email is about any suspicious activity, you don’t need to do anything.”

“Signing up for Property Alert won’t automatically stop fraud from happening. You will need to decide if the activity on the property is potentially fraudulent and act quickly if so. The alert email will tell you who to contact.”

Skyrocketing rent prices have been pricing prospective tenants completely out of much of the market for some time. Coupled with the escalating living-cost crisis, millions are finding it difficult (if not practically impossible) to make ends meet.

When and where the whole thing will begin showing at least modest signs of improvement remains to be seen, but things are almost certainly going to get worse before getting any better.

Younger people in the capital are finding themselves particularly hard hit, where the average cost of renting a home has always been disproportionately high. With average weekly rents having once again broken all records, a sizeable proportion of London’s private renting community is considering leaving the city entirely.

According to a new study conducted by the charitable foundation Trust for London, the average cost of renting a home in London is now £533 per week. This represents an increase of more than 16% since the same time last year, at which point private rentals were already completely unaffordable for many.

As a result, as many as one in four young renters are now saying they may be forced to leave London in the near future due to their growing inability to pay their bills and sustain their lifestyles.

Wages are insufficient to cover living costs

The study also indicated that between April and March this year, the average rental price for a one-bedroom property in London was the equivalent of just over 46% of the average Londoner’s gross median pay. By contrast, renters across the rest of the country use around 26.4% of their gross median pay for rent.

Reporting separately, Foxton Estate Agents said that one of the drivers behind skyrocketing rent prices in London was explosive demand, coupled with minimal available inventory. They said that around 23,000 rental properties were listed on the market in September, meaning that an average of 29 people were competing for each property listed.

There are approximately 9% fewer properties available on the private rental market in London than at the same time last year, while demand has increased by as much as 20 per cent.

Consequently, as many as 20% of younger people are planning on leaving London entirely, as they simply cannot afford to keep spending so much of their money on rent costs alone.

Prices are likely to continue rising

As more and more people pile back into big cities following the mass exodus prompted by the coronavirus crisis, average monthly rents in London are predicted to continue increasing.

Speaking on behalf of Hamptons, head of research Beveridge said that the return to the new normal would most likely continue pushing average London rental prices higher.

“With COVID-19 being pushed further to the back of people’s minds, life in the capital is slowly returning to its new normal. Tenants are returning to the bright lights of the city, and this is driving rental growth to record highs,” she said.

“The rise of remote working means that fewer tenants are moving to the capital specifically for work. In fact, a growing number of tenants choosing to live in London are working fully remotely and could live nearly anywhere in the country. The footloose nature of many jobs today means that it will be culture and lifestyle rather than employment that become the capital’s biggest draw.”

“The current pace of London rental growth is predominantly down to the capital playing catch up with the rest of the country.”

“Today, the average rent in London stands 103% above the average outside the capital. While this gap is up from 96% a year ago, it remains below the 120–30% pre-COVID-19 premium, which has been eroded by strong rental growth outside the capital in recent years. But the current pace of rental growth in London is likely to push the premium closer to its pre-COVID-19 level within two years.”

Understanding where planning permission rules came from and why they exist holds the key to making sense of them in a modern context. Right now, estimates suggest that at least 300,000 new homes need to be built every year for the next decade, just to ensure the government meets its own lofty housing targets.

In reality, the likelihood of this actually occurring is practically zero.

Critics believe that sweeping changes to planning permission rules and general building regulations could hold the key to turning around the UK’s escalating housing crisis. Whether any such alterations come about remains to be seen, as many developers and construction companies continue to find themselves blighted by overly complex rules and regulations.

A brief history of planning permission

As the Second World War drew to a close, the reconstruction of towns and cities across Britain became the government’s top priority. Plans were also drawn up for developing entirely new towns and cities from scratch.

To get things started, the 1946 New Towns Act established a programme for the development of new towns. This resulted in several areas of the country being designated for new town and city projects, the first of which would emerge as Stevenage.

However, the 1947 Town and Country Planning Act followed soon after, placing heavy restrictions on where rapid urbanisation of rural spaces would be permitted. At this point, planning permission needed to be issued by local councils for any developments to proceed.

In 1955, conservative minister Duncan Sandys requested that local councils prohibit the development of new residential zones on the edges of towns and cities, so as to:

A: Check the further growth of a large built-up area.
B: Prevent neighbouring towns from merging into one another.
Preserve the special character of a town.

From the 1990s

There was a moderate easing of planning permission restrictions in the 1990s, or when the Town and Country Planning Act had been updated. At this point, it would only be necessary to apply for planning permission for projects that formerly met the definition of “development”. Things like changes in the primary use of land or buildings, interior alterations, and projects that do not alter the external appearance of buildings could all be performed without applying for approval.

A General Permitted Development Order was implemented in 1995, providing even greater scope and flexibility for developers. Later in 2013, the government acknowledged that the need for residential spaces across the UK should prompt a rethink of current restrictions.

The rules were modified once again, and the conversion of certain commercial properties into residential homes became exempt from planning permission guidelines. However, some of the country’s less reputable and responsible “cowboy” developers exploited the new freedoms, creating tiny and uncomfortable flats out of office spaces that were never meant to accommodate residents full-term.

Recent changes to planning permission

Most of the recent changes to planning permission rules have focused on raising residential standards. New rules were introduced towards the tail end of the COVID-19 crisis to allow more types of commercial conversions, including the repurposing of medical facilities and gyms into residential units.

As things stand, anyone looking to build something new, make significant changes to an existing building, or alter the main use of a building needs to apply for planning permission. None of which is helping new and aspiring developers get their projects off the ground, but there is at least a dedicated Planning Portal now, which is designed to simplify the process of obtaining planning permission.

Property developers and construction companies have not had an easy ride as of late. Ever since the COVID-19 crisis hit, the costs of essential building materials have skyrocketed to unprecedented highs. The war in Ukraine took a further toll on already stretched supply lines, making it impossible for developers to turn a profit without imposing their own lofty price hikes.

With the UK facing its worst collective living-cost crisis in recent history, the immediate outlook for the average household is fairly bleak. But there may be at least a small degree of respite on the horizon for builders and property developers, as construction costs are beginning to plateau.

Better yet, there is reason to believe that building costs will begin to decrease going into 2023, enabling developers and construction companies across the UK to kickstart (or restart) their planned projects.

Will the economic downturn trigger a reduction in building costs?

One of the reasons why building costs increased significantly towards the tail-end of the COVID-19 crisis was the simply insurmountable divide between demand for building materials and available supply. Developers and construction companies across the UK raced to keep up with demand, and in doing so completely swallowed up the available contingency of key materials.

Supply lines dried up, availability of essential materials hit rock bottom and prices skyrocketed as a result.

When this happens, many developers and construction companies decide to shelve planned projects or put their existing projects on hold. They simply had no realistic way of generating meaningful profits with such elevated building costs, so they made the decision to wait things out. Their aim was to sit tight until the market returned to some kind of normality, rather than paying over the odds, and reducing the profitability of their projects in the meantime.

All of this seems to be paying off for many, who have already noted a significant reduction in the cost of some essential building materials. Some have even reported that compared to the end of Q2, they are now receiving quotations up to 10% lower on key materials and components.

These reductions in building costs are resulting from two things: A period of comparatively low demand when costs were disproportionately high and the rectification of a broad range of supply chain issues. Key building materials are still not available in the same plentiful supply they once were but are no longer as difficult to come by.

As a result, the manufacturers and suppliers are not able to charge such high prices for them and low prices are gradually trickling through to property developers and construction companies.

In forwards into 2023

Of course, putting too much stock into what is happening (or appears to be happening) right now may not be advisable. The events of the past few years have taught us that nothing is set in stone, and we have no idea what may be around the next corner.

As the crisis continues to escalate in Ukraine, it is perfectly plausible that major supply chain issues could once again cripple the UK’s property development sector.

Even so, the consensus seems to paint a picture of a slightly more stable and predictable future for the industry as a whole. Building material, component and labour costs may remain elevated indefinitely but are unlikely to hit the same kinds of peaks as those experienced at the height of the COVID-19 crisis.

Property developers and construction companies are exercising greater care and caution than ever before, and in today’s turbulent climate are unwilling to take the kinds of risks they would once have happily accepted as the norm.

The past 12 months alone have added an average of £39,000 to the market value of a UK home. Millions of homeowners have found themselves sitting on a small fortune and understandably want to get the best possible return on their investments.

Conducting home improvements and renovations is one of the best ways to maximise a property’s value before listing it for sale. But exactly how much does it cost to renovate a home, and how can you ensure the improvements you make generate respectable profits?

How much do renovations cost?

A combination of factors over the past few years has seen the costs of property renovations skyrocket. From basic building materials to labour to the latest green technologies, prices across the board are on the rise.

The average loft conversion, for example, now costs around 25% more to undertake than it did two years ago. Alarmingly, the cost of installing a new bathroom in a residential property is also up by as much as 40%.

Renovation costs vary significantly from one property type and area of the UK to the next. According to the Homeowners Alliance, this is how much you can expect to pay to renovate and improve your home in 2022:

Source: hoa.org.uk

On top of the above, experts advise allowing an additional 10% to compensate for unexpected issues and additional costs encountered along the way.

What are the best renovations to add value to a property?

When it comes to generating the best possible ROI with property renovations, some home improvements are known to generate bigger profits than others.

For example, a loft conversion has the potential to generate the biggest profit of all (an average 16% property price increase), followed by a double-story extension at 15%. A single-story extension will typically increase a home’s value by 11%, whereas a complete kitchen renovation can contribute 10% to a property’s resale value.

Meanwhile, adding a conservatory to your home could increase its market value by 9%; a single garage can add an average of 7% to the value of a home; and a medium-scale bathroom refit can contribute 4%. Surprisingly, simply painting and decorating the interiors of a property can boost its asking price by as much as 3%.

How to avoid overpaying

Irrespective of the type of renovations you set your sights on, it is up to you to ensure that you don’t overpay. Before entering into a contract with any builders or construction companies, ensure that they are registered with the likes of Trustmark, the National Federation of Builders, or the Federation of Master Builders.

Using Checkatrade to verify the credentials of other types of contractors is highly recommended, as is requesting recommendations and references from past customers.

Fixed quotations should always be issued in advance of the commencement of a project, and all essential terms and conditions must be agreed upon in writing. You should also be given as much time as needed to evaluate the provider’s reputation and stature, with no pressure to go ahead at any time.

Online reviews and recommendations alone can give you a good idea of whether a service provider or contractor is worth doing business with. If there is a disproportionate quantity of negative feedback or anything untoward about their track record, you could be taking a risk by putting your home in their hands.

Up and down the country, landlords and everyday households are scurrying to find any and every viable solution to the UK’s spiralling energy bills. This year may have brought Britain’s hottest temperatures on record, but the prospect of an exceptionally bleak winter is already taking its toll on the nation’s welfare.

The escalating living-cost crisis was and is one of the most pressing issues for Liz Truss, who just days into her premiership announced plans to freeze energy bills at an average of £2,500 a year for two years. The announcement came as part of much broader support packages for households and businesses, but whether she remains in power long enough to come through on any of her pledges now remains to be seen.

Indeed, there are those in government (including several prominent members of the Conservative Party) who believe Liz Truss will be ousted before the end of the month.

Either way, capping energy bills at an average of £2,500 a year for two years is not something most would praise as a major step in the right direction. It still represents a major increase from last year’s average household energy bill of £575 for gas and £764 for electricity.

Striving for longer-term savings

A joint study conducted by Scottish Power and the World Wildlife Fund (WWF) found that the average household could save almost £1,900 per year by upgrading to the latest green technologies. This includes advanced insulation, the installation of heat pumps, and the use of solar panels.

All of these devices work in different ways, but they are ultimately designed to reduce energy consumption and bring household energy costs under control.

Unfortunately, stepping up to these kinds of green technologies is not something that comes cheap. It can cost anything from £7,000 to £13,000 to install a heat pump, while solar panels for the average home will typically carry a price of between £5,000 and £11,000. With the living cost crisis biting harder than ever before, this simply is not the kind of money most people have at their disposal.

This is where government bursaries and grants can offer at least a modest lifeline to many households and landlords. The Green Homes Grant scheme has now come to an end (at least in the sense that no further applications are being accepted), but there are still initiatives like the Boiler Upgrade System that can pave the way for significant discounts.

One grant application can be submitted per property, which (if successful) could be worth as much as £5,000 to £6,000 off the price of installing a heat pump or biomass boiler, either of which could significantly boost a property’s energy efficiency and effectively pay for itself long-term.

Improved property values

Along with reduced household energy bills, property owners are being prompted to consider the extent to which green improvements can increase a home’s market value. Specific figures are hard to come by, but the study conducted by Scottish Power and the World Wildlife Fund (WWF) suggested that the average home could see a £10,000 boost to its market value through the adoption of green technologies.

But as all green technology grants and incentives introduced by the government to date have been strictly temporary in nature, those looking to take advantage of any such discounts are advised to do so as promptly as possible. Landlords in particular stand to make significant savings by investing in green technologies for their rental properties, as the countdown continues to the introduction of the government’s tightened carbon emissions rules for all UK households.