Falling House Prices Make Property Investment More Affordable in 2023

For many, the current state of the UK housing market is a cause for concern. But should investors instead see the current housing climate as an opportunity?

At the end of 2022, the average property price dropped to £262,068, falling for the fourth time in a row 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 many UK property investors.

But what caused this drop in house prices, and what does it actually mean for those looking to invest in UK property in 2023 and beyond?

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. Read our latest property news blog to find out more.

Of course, this all sounds incredibly dramatic and appears to have come right out of the blue, but this price drop has been expected by many property experts for a long time now – due to two years of inflated house prices post-pandemic.

However, despite the price crash being anticipated, the market has become more volatile than experts predicted due to the cost of living crisis and other similar factors.

Alongside this, many experts are also forecasting a further decline in 2023. For example, Lloyds, the UK’s largest mortgage lender, expects prices to fall by 8% this year.

This may seem slightly troubling, as if this happens, it could risk putting newer investors into negative equity, especially if prices fail to recover for some time.

However, such a fall is not expected to completely erase the increase in house prices seen in the last year (the most recent House Price Index shows the average property price increase by 10.3% in the year to November to £294,910).

Looking at all this data, it is no surprise that many investors are wondering if now is the right time to invest.

However, despite how concerning these rates may appear at first, now is one of the most beneficial times to consider property investment.

Prices are much lower due to the drop in house prices overall. Therefore, those who can afford to invest in property could actually see significant returns – especially in conjunction with a thriving rental market.

As the population in the UK continues to grow, there is still a severe lack of supply to meet the demand for housing.

According to a report by Zoopla, demand for rental property is 46% above average, with the total supply being 38% below average.

With the market expected to remain so volatile, more people will also be more likely to rent instead of buying a house outright.

In fact, the number of renters in England and Wales has jumped by 28% during the past 10 years, according to the latest Housing Census data.

With the current state of the market, as well as the lack of new affordable housing and the ongoing cost of living crisis, it is likely that rental demand will only continue to increase in 2023 – allowing for a great investment opportunity.

With prices significantly lower than before, and rental value continuing to rise, there could be a perfect chance for investors to get involved with property before prices skyrocket when the market recovers.

At the height of the pandemic, house prices in the UK saw a significant drop, with averages falling by 0.6% between March and April.

By the end of the year, though, 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.

Consider the current situation the same: a natural reset button for the market after a rather chaotic year.

It’s also important to remember that this is not permanent. In fact, the latest forecast from Savills predicts house prices will rise by 6.2% in 2026 – so, for investors in 2023, it could be the perfect time to get involved before prices skyrocket after the market recovers.

Whether you’re a veteran investor or not: the current state of the market might look slightly concerning.

Like most investments, property can sometimes be difficult to wrap your head around.

With over 18 years of experience in property investment, RWInvest is one of the nation’s top property investment companies, helping both newcomers and experienced investors find the best buy-to-let properties on the market.

Our dedicated teams have vast knowledge about the property market and how it has changed over time.

If you’d like to learn more about the current state of the housing market, get in touch with our sales team today.

With specialists able to help you every step along your property investment journey, we have some of the best investment opportunities available in buy to let hotspots like Liverpool, Manchester and London.