2022 was a fantastic year in terms of capital appreciation, as house prices snowballed over the course of the year.
The average house price in the UK as of October 2022 was £296,000. When compared to the average price of December 2021, £ 275,000, you can see that this is a sizeable level of growth.
Some areas of the UK saw even higher levels of growth, such as the North-West. Thanks to property hotspots like Manchester and Liverpool, this area of the UK experienced annual growth of 16.1%, significantly higher than the national average.
However, according to property market predictions, in 2023, it is unlikely that this period of prosperity will last.
Two of the main reasons behind this rapid growth are how the UK recovered from the effects of the COVID-19 pandemic and the high demand for property combined with the low levels of supply.
However, with us now being two years post-lockdowns, the economy has mostly recovered from COVID-19 and its effects.
While there is still high demand for housing, the rapid rise of house prices has met the cost of living crisis that the UK is currently experiencing, making housing unaffordable to many at the current rate of inflation.
Therefore it is unlikely that house prices will continue to grow at the rapid rate that we have experienced so far in 2022, and that growth will slow down in 2023.
In fact, due to the cost of living crisis and the cumulative state of the UK economy after the political upheaval we experienced in the latter half of 2022, it would not be surprising to see house prices fall a small amount in 2023.
The latest forecast from Savills predicts that house prices could fall by up to 10% across the UK in 2023, but this is no cause for alarm.
Instead, think of it as a natural reset button for the housing market after a chaotic 2022, where housing will become more affordable for many. Savills’ forecast also predicts that house prices will rise overall by 6.2% by 2027, so if you see house prices falling in 2023, don’t panic and consider it a permanent change.
In fact, for investors, 2023 presents a prime opportunity to invest in UK property while prices are low but set to increase.
Back in 2020, house prices in the UK saw a temporary slump during the beginning of the COVID-19 pandemic, with average prices falling by 0.6% between March and April. By the end of 2020, average UK property prices had risen to record levels and continued to rise ever since, meaning investors had made strong capital growth returns.
If you want to secure the best capital growth in the long term, consider a 2023 UK property investment.