House prices to see a 'correction' rather than a market crash in 2023, experts say

Halifax has said house prices in the UK look set to fall by eight per cent through 2023, with some stand-offs as expectations adjust.

But with the value of the average home rising 23 per cent - or £55,000 in cash terms since March 2020 - prices are set to remain higher than before the recent boom.

Andrew Asaam, the bank's homes director, said: "Such a fall would place the average property price back at roughly the level it was in April 2021, reversing only some of the gains made during the pandemic."

Surging living costs, and uncertainty over unemployment and mortgage outgoings are all set to add to the challenge, experts have said.

Despite this, a shortage of homes to choose from is expected to hold up prices somewhat.

Nationwide Building Society expects house prices could edge down by around five per cent in the year ahead, while trade association UK Finance said it expects the number of house sales to fall slightly.

Richard Donnell, executive director at Zoopla, said that, despite the "shock" of mortgage rates jumping in autumn 2022, banks are "ready to lend".

Zoopla expects sales will be supported by buyers looking for space to work from home, an ongoing spike in people retiring and - amid high energy costs - some people moving to properties that may be more cost-effective to run than their current homes.

Mr Donnell said: "Overall, 2023 may well confound the more gloomy forecasts made at a time when the outlook for mortgage rates looked much worse."

Amid expectations that asking prices may dip, there are suggestions this may result in a "stand-off" between buyers and sellers as the tone is set for the year ahead.

This could prove particularly pronounced in the early months of this year, according to Rightmove's property expert Tim Bannister.

He said: "Though many buyers will feel the pinch of stretched affordability and will try to negotiate hard for the home they want, sellers may not be in a rush to meet their expectations and will feel like they can hold out for the price they want, particularly if they don't see much competition from other sellers in their area.

"There will be less urgency in the market as buyers wait for the right home to become available for their needs, leading to homes taking longer to sell, and we could see a return to the more normal time to find a buyer of around 60 days."

Kylie-Ann Gatecliffe, meanwhile, is director at Selby-based broker, KAG Financial. Despite the "doom and gloom" that many are predicting, she said she is more optimistic.

Even if there was a 10 per cent drop in house prices, outlined Ms Gatecliffe, this would only be offset against a 13.6 per cent rise in the year to August alone: "There will be less of a housing crash and more of a correction to pre-pandemic prices. As busy as the past two years have been with property sales, it has been tremendously difficult for first-time buyers to get on to the ladder. 2023 could be their year.”