Debate: Is 2023 the Year for Purchasers or Landlords?

In the midst of a cost of living crisis, higher than usual mortgage rates, and record-low mortgage approval rates in the UK, a pertinent question emerges; is 2023 the year for purchasers or landlords?

In 2022, the Oxford Economics Consultancy revealed that UK’s properties were overvalued by about 30%. This overvaluation was linked to the uncertainty, triggered by the mini-budget of September 2022, which led to uncertainty and panic in the UK economy. This situation has since spilled over into 2023 and has led many to wonder who really stands to benefit.

The Road Ahead

Economic experts are anticipating a reversal of the current overvaluation situation by December 2023. They are also predicting price decreases of around 8-10% in 2023 and 12% by the end of 2024.  If prices decrease as predicted, buyers will be in a better position to acquire properties and of course, more people will gravitate towards home ownership.

The short supply of rental properties also continues to influence demand for mortgages as more people, frustrated by the dearth of rental units, seek properties to buy.   The predicted changes in the market (increased affordability for buyers) should also help as this means fewer people will be seeking rental properties. On the face of it, this does not seem positive for landlords.

A Positive Spin

The good news is that the increases in mortgage rates and low approval figures are expected to normalize by the end of 2023. As this occurs, property prices are expected to fall within the reach of more purchasers. This will reduce the demand for rental properties (which currently outstrips supply) but should also have the effect of increasing property prices. If property prices climb beyond the reach of consumers, then landlords stand to benefit from a larger tenant pool.

The Reality

But predictions aren’t always spot on, so the odds may change. The truth is it is the acts of buying and selling with sitting tenants impact the state of the industry, not the predictions.  So whether the market shifts in favor of buyers or landlords will depend on these actual market forces. An increase in demand may drive prices up shifting the tide in favor of the landlords while a decrease will do the opposite.

Despite the uncertainty in the economy, the UK’s property industry continues to offer both landlords and purchasers and other interested parties opportunities to enhance their portfolios.  With the right strategic decisions, both can navigate these uncertain waters successfully.

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