Q1 2023 set the tone for the rest of the year as far as house prices were concerned. House price growth began a gradual decline.
A month-on-month fall in property prices saw prices drop from £286,321 in January to £281,555 in March. Per the HM Land Registry UK House Price Index, house price growth dropped to 5.0% in January (down 3.1% from December). By March, price growth had fallen further to 2.8%.
While this may seem negative, the statistics also reflect the massive change in house prices post-Covid. Prices rocketed to £292,674 following the pandemic – an all-time peak for the UK property market – caused by a surge in transactions and huge buyer demand.
The price increase was unsustainable. The bubble needed to burst. Unfortunately, this came in the form of Kwasi Kwarteng’s mini-budget and a cost-of-living crisis.
As confidence in the GBP waned, many would-be investors chose to save money rather than make an expensive purchase in the property market.
The resulting drop in demand meant property prices fell, and asking prices dropped as sellers looked to attract buyers. However, this served as a healthier market reset compared to the alternative – a housing market crash.
However, the rental market saw a huge boost thanks to rising tenant demand contributing to substantial rental growth.
Rental inflation increased by 11% in Q1 2023 due to a lack of properties available on the UK market. This supply and demand imbalance would go on to affect the UK property scene for the remainder of 2023.
This was fantastic news for property investors, though the cost of living crisis threatened to price tenants out of many properties.
The UK’s major cities saw substantial rental growth, which went on to be the case for most of the year, particularly in London, which had the lowest rental supply levels in the country in Q1.
If you want to invest in buy-to-let properties, our buy-to-let housing guide is a good place to start. You may also want to read our stamp duty buy-to-let guide to better understand the additional costs of property investment.
