Is 2023 A Good Year To Sell Property?
With a new year underway, many homeowners are considering whether 2023 could be an opportune time to sell their property. The UK housing market saw turbulence through 2022 amid economic uncertainty. As we move into 2023, will conditions stabilise and stimulate a vibrant spring sales market? Or does ongoing volatility mean house sellers should delay plans? Weighing up the prevailing headwinds versus tailwinds can determine if selling in 2023 looks to be a good move.
Reflecting on the Market in 2022
To judge if 2023 will favour sellers, it helps to recap how the market performed during 2022:
- House prices saw double-digit growth in the first half of 2022 continuing from the previous year.
- Demand was boosted by pent-up buyer activity post-pandemic restrictions.
- Cost of living pressures began to squeeze affordability as inflation rose.
- Mortgage rates increased sharply following successive Bank of England base rate hikes.
- Higher rates cooled demand and caused sales volumes to decrease from summer onwards.
- Lack of supply persisted with low numbers of houses available for sale.
- Asking prices remained resilient despite the headwinds facing buyers.
- Price growth slowed from mid-year though still registered an annual increase.
While the pace of the market slowed noticeably, price corrections were minimal thanks to the supply-demand imbalance. The market proved more resilient than expected.
Headwinds Facing Sellers in 2023
The strongest argument against selling in 2023 is ongoing economic uncertainty that may dampen buyer demand:
- High inflation continues to drive up household costs likely to kerb demand.
- Further Bank of England interest rate rises projected making mortgages costlier.
- Consumer confidence and big-ticket spending are still muted by financial pressures.
- The potential of a recession unfolding during 2023 weighing on market activity.
- Buyer affordability continues to be stretched by rising prices and costs.
- Lenders tightening lending criteria as recession risks increase.
- Risk of more substantive house price falls if recession bites.
These headwinds present challenges indicating transaction volumes may continue decreasing in 2023. However, the extent of downward pricing is disputed.
Factors Supporting Sellers in 2023
Despite the risks, certain elements may encourage sellers to press ahead in 2023:
- House prices remain historically high after recent years of growth.
- The lack of available properties for sale keeps upward pressure on prices.
- Demand still exists from buyers undeterred by higher costs.
- Competition persists for limited stock, especially for family homes.
- Distressed sales are unlikely with low repossession rates.
- Government policy steps could cushion any downturn.
- Investor appetite continues for rental sector growth.
- Employment levels and wage data still show resilience.
On balance, while demand may moderate, supply constraints suggest price corrections in 2023 may be relatively shallow. The environment may support pricing for motivated sellers.
Exchange of Contracts Deposit
Exchanging contracts represent the legal commitment between a seller and buyer to complete a property transaction. At this binding stage, the buyer pays an initial deposit, usually 10% of the agreed property price. This exchange deposit serves three key purposes:
- It commits the buyer to the sale, preventing withdrawal without losing the deposit. This provides security to the seller.
- It gives the seller confidence the buyer has the financial resources to proceed.
- It guarantees funds are available to contribute toward completion.
Protection for the seller increases if a 20% exchange deposit is negotiated rather than the typical 10% level. This deposit is held by the seller’s conveyancer until completion is finalised. Asking for a bigger initial deposit can deter time wasters when selling.
Regional Variations in 2023
Property markets across the UK do not all move in sync. Local supply and demand factors can create regional differences in performance. When weighing up selling in 2023, consider how conditions may differ across areas:
- Property hotspots like London and South East England usually react first to any downturn.
- Regions with more marginal price inflation may stall or see slight decreases.
- Supply shortages are less acute in some northern regions, easing price pressures.
- Resources-led markets e.g. Aberdeen may be impacted by global uncertainties.
- Demand may hold up better in cities with strong diverse economies.
- Brexit effects may linger longer in areas more dependent on EU links.
- Major infrastructure projects can influence regional outlooks positively.
While nationwide trends give an overview, drilling down into local details aids decisions on the best timing to sell.
Is 2023 a Good Time to Downsize?
Older homeowners considering downsizing may find conditions in 2023 conducive, for several reasons:
- Equity levels remain healthy after recent house price growth.
- Lower running costs of a smaller home are attractive amid rising bills.
- Excess living space is less appealing with energy spent under pressure.
- Reinvesting equity into retirement funds makes financial sense.
- Greater supports are available via ‘equity release’ schemes.
- Lower maintenance needs of a newer or modernised property.
- Scope to minimise belongings to reduce clutter.
- Adapting a home for mobility is easier in more suitable properties.
For those looking to downsize, current incentives may outweigh hesitations around market risks in 2023. Release of an existing larger home may also aid local supply.
First-Time Sellers in 2023
For prospective first-time sellers hoping to move up the ladder, uncertainties in 2023 need to be balanced against urgencies:
- A recession increases the risks of negative equity if prices fall after purchase.
- However, delaying entry to the market may mean missing out on lower rates.
- Low supply still restricts choice for buyers limiting leverage to negotiate.
- Elevated prices make selling to unlock equity for the next step attractive.
- Selling may be the only way to secure the ideal next home when available.
With moderation expected rather than substantial falls, first-timers may lean towards selling to progress their property plans.
How Might Inheritance Tax Changes Influence 2023?
Possible changes to Inheritance Tax rules have been flagged that may encourage selling:
- Reducing the 7-year rule for IHT exemption to a 5-year minimum could accelerate sales.
- This would reduce the timeline for properties to qualify as exempt from IHT after purchase.
- May motivate more elderly sellers to downsize sooner while values are higher.
- Shorter qualification creates an incentive to sell before IHT status expires.
- Sales proceeds may be gifted or invested in exempt assets like ISAs.
- Buyers may target properties nearing the 5-year IHT threshold.
If introduced, shortened IHT timeframes could stimulate sales of older owner properties in 2023.
Predicting market movements in 2023 involves balancing the dampening impact of economic headwinds against the continued shortage of housing supply. The data suggests risks may outweigh opportunities for buyers currently. But motivated sellers willing to price realistically can still achieve sales. Vulnerable owners may choose to delay. However active owners who prepare thoroughly may benefit from seizing the initiative early in 2023 before more hesitant competitors join the market. With careful pricing and presentation, proactive sellers can spotlight their property’s attractions for discerning buyers unperturbed by macro-trends. The background conditions in 2023, while challenging, may still accommodate successful sales at the micro-level. Additionally, when navigating through the selling process, it’s important to understand terms such as exchange of contracts deposit. Familiarising yourself with the specifics of the exchange of contracts deposit can help streamline the transaction and provide clarity for both buyers and sellers.