Tom Smith, Managing Director at Smiths Property Experts, a brand new, exciting, and modern estate agency, shares his thoughts and predictions for the residential property market in 2023.

As the promise of a New Year awaits, many of our clients and the public seem inquisitive, intrigued or even worried about what 2023 may look like from a property market perspective. In essence, I am not surprised as so many of us have an investment in property, be that financial or emotional. Below are my thoughts and predictions for the East Midlands market in 2023.

Property Values

With pressure on household budgets, it would be easy to align with those commentators that predict a market fall in the value of our home and the cost of rent. I personally do not conform to those views. With an ever-growing population, there is a shortage of housing stock in the country. This issue will not likely resolve for decades, even with the most ambitious of development plans. Like any commodity, the lack of supply is likely to maintain an upwards pressure on property values across the country.

The East Midlands region is more connected than ever, with easy access to major towns and cities, airports, and London. As such, I expect that we will see a continued migration of home buyers from ‘higher value’ areas with relatively strong buying power willing to commute that bit further to achieve a lovely lifestyle in the Midlands.

Quality of Life

The Midlands offers for some an undiscovered quality of life. Green areas, spots of natural beauty, history and architecture, combined with access to the industrial and professional hubs of Nottingham and Birmingham, offer a fantastic lifestyle. Schooling choices are exceptional and there is an abundance of sporting opportunities. We are blessed to have low crime rates and generally an excellent standard of living in the East Midlands, offering a real alternative to some of the less affordable regions in the country.

Borrowing Rates are still historically low!

Whilst mortgage rates are currently a contentious topic, historically it is still cheaper to borrow now than at any point in our lifetimes if you discount the last five years or so. I predict that interest rates will start to peak in Q2 of 2023 and from there they are likely flat line for the medium term. Simply put, we all must subscribe to likely borrowing rates of between 3.5% and 6% over the medium term, be that on your current home or the next one. Borrowers in a relatively strong position now have the option to spread the term of their borrowing over 40 years, with some financial commentators expecting 50-year products to become available in the near future, as well as options to retain your mortgage for life. Coupled with excellent public healthcare, the reality that many of us have strong pension provisions, and likely continued long-term growth in the value of our homes, there is a real argument to suggest that being ‘mortgage free’ doesn’t offer any more freedom in these modern times as those who have planned differently.

The Cost of Building

It is becoming universally accepted that labour and material rates are climbing. As a result, the cost of building has risen somewhere in the region of 60% over the past two years. This inflation, coupled with a shortage of housing, really prohibits a negative market. Simply put, whilst there are not enough homes available and we cannot keep up with demand, how can the bottom fall out of the market?

How does 2023 look?

Whilst there are undoubted challenges on the horizon, I predict that we will end 2023 with the value of our homes intact. Whilst growth may not be as exciting this year, we have seen an increase in both property values and rents in the region of 20% since the first Covid-19 lockdown. I subscribe to the train of thought that a year of consolidation will be good for all, tenants included. On that basis, I would advise that now is as good a time as any to consider a property purchase. In the end, we all have constantly changing needs, whether you are looking for your first home, needing more space or downsizing. Our homes provide the stable backbone for financial and emotional investment, and they must continue to do so irrelevant of headwinds in either direction.