The UK property market has always been a rollercoaster, but the first quarter of 2023 seems to have brought a unique blend of highs and lows. In this article, we‘ll take a look at what happened in the last quarter and make some predictions about what could be in store for Q2.  

Stellar Surge in Home Demand 

In February 2023, home demand soared to an astonishing 8% higher than the pre-COVID era, marking an impressive recovery for the property market. With people re-evaluating their living situations and considering opportunities to upsize or relocate, the UK property market has seen a significant boost in interest. 

On the flip side, sellers are feeling the pinch as they are compelled to accept an average discount of 4.5% to the asking price for securing a sale – the highest in the past five years. A buyer’s market has firmly taken hold, presenting a double-edged sword for those seeking to enter or progress in the property game. 

A Hit to Buying Power 

Mortgage rates have experienced a dramatic increase, jumping from 2% last year to 4% this year. This rate spike has had a notable impact on buying power, with potential homeowners bearing a 20% hit. Higher interest rates can cause complications for both first-time buyers and anyone looking to move up the property ladder. 

As a result, we are starting to see the property market adjusting more broadly. UK house price inflation is expected to move into low-negative year-on-year by summer, suggesting that the worst of the pricing adjustments may be behind us. However, house price growth is predicted to slow further over 2023, with the possibility of dipping into negative territory. 

3-Bed Homes: A First-Time Buyer’s Dream 

In a fascinating reflection of current societal priorities, the humble three-bedroom home has emerged as the most in-demand property for first-time buyers in Q1 2023, accounting for 40% of the market.  

Yet, there is also a clear shift in FTB demand towards two-bedroom flats – an indication that more people are considering smaller living spaces and potentially investing more money into urban city-centre settings such as Liverpool, Bradford and Glasgow. 

With the current balanced state of the housing market, sales could exceed 1 million over 2023 if the trend continues, demonstrating a strong appetite for homeownership. 

House Prices Are Undergoing a Soft Reset 

According to Hometrack’s UK Housing Price Index, house prices have been on a slight downward trajectory since the beginning of 2023. We expect this trend to continue over the next 2-4 months, resulting in small monthly reductions.  

We expect the index to show a slight decrease in prices of 2 or 3% per year by summer, providing a soft reset in house prices and offering opportunities for those seeking a bargain.  

Outlook: What Lies Ahead? 

Overall, it’s too early to make a call on the future of the UK property market. However, Q1 of 2023 has shown us that buyers are still out in force, and demand remains strong despite the economic uncertainty. With mortgage rates expected to level off by summer, we could be set for a recovery in house prices and an influx of new buyers over the coming months.  

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