Falling House Prices Make UK Property Investment More Affordable in 2023

Falling House Prices Make UK Property Investment More Affordable in 2023

At the end of 2022, the average property price dropped to £262,068, falling for the fourth time in December and resulting in the longest run of declines since 2008.

Annual house price growth also stalled at the end of the year, with rates seeing a decrease of 2.3%.

With rising energy costs and interest rates contributing to falling house prices, alarm bells may be ringing for those looking to get into property investment UK for beginners.

What caused this severe drop in prices – and what does 2023 have in store for this kind of investment?

Why Are House Prices Falling?

While this crash might seem like an unexpected occurrence, it has been expected by experts for a long time due to the two years of inflated house prices.

Despite this being anticipated, however, the market has become far more volatile than many predicted as a result of the ongoing cost of living crisis in the UK (and other similar factors).

Experts are now similarly forecasting further decline this year, with UK mortgage lender Lloyds predicting prices to fall by 8% this year.

If this does happen, it could risk putting newer investors into negative equity – particularly if prices fail to recover for some time afterwards.

However, this kind of drop is not expected to completely erase the increase in house prices seen last (with the latest House Price Index showing that the average property price increased by 10.3% in the year to November to £294,910

What Does This Mean for Investors?

The good news is that for investors looking to secure a buy-to-let property at a lower price before prices rise over the coming years, 2023 is the perfect time to get started.

Despite how concerning these rates seem, right now is one of the most beneficial times to consider property investment.

House prices, on average, are much lower due to the overall decrease in prices overall. This means that those who can afford to invest could actually see considerable returns, especially in conjunction with a thriving rental market.

The Rental Market is Booming

The population in the UK is on the rise – and there’s a severe lack of supply to meet the growing demand for housing.

According to Zoopla, demand for rental property is 46% above average – with total supply 38% below average.

As the market remains so volatile, more people will likely rent instead of buying a house outright.

For example, according to the latest Housing Census data, the amount of renters in the UK has increased by 28% over the last 10 years.

Should You Invest in 2023?

The current state of the market, as well as other factors like the lack of affordable housing and the cost of living crisis, means that rental demand is likely to only increase in 2023: allowing for a solid investment opportunity.

This could also be the perfect chance for investors to get started with property investment before prices surge when the market is in recovery.

Consider the current state of the market like this:

A natural reset button after a tumultuous year.

In 2020, house prices in the UK saw a similarly significant drop – with averages falling by 0.6% between March and April.

By the end of the year, however, these prices had risen to record levels; and continued across the next two years, allowing for strong capital growth returns for those that had invested in property.

It’s also important to remember that this is not a permanent situation.

The latest forecast from Savills suggests that prices will rise by 6.2% over the next three years: so for investors, right now could be the best time to get involved before prices skyrocket.