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There have been talks of a potential housing market crash in 2023 however, will prices ever really go down? In this article, we take a look at 3 possible signs that point towards lower housing prices this year.
1. Fewer first-time buyers
One of the biggest signs that prices are about to drop is the significant decline of first-time buyers in recent years. There are currently fewer first-time buyers due to exceedingly high mortgage rates and unaffordable property prices. As a result, many first-time buyers are delaying buying a house until prices drop.
When there are fewer first-time buyers in the market, there is less demand for starter homes and entry-level properties. This means that sellers of these types of homes may struggle to find buyers and may be forced to lower their asking prices in order to attract buyers.
Additionally, when there are fewer first-time buyers, there may be less demand for move-up homes as well. Move-up homes are typically purchased by people who are looking to upgrade from their starter homes. If there are fewer first-time buyers purchasing starter homes, there may be less demand for move-up homes as well, which could also push prices down.
2. A weak US dollar
As one of the biggest global currencies, the performance of the US dollar can have a big impact on the UK housing market. According to this economic calendar, the dollar is currently weak after months of volatility.
A weak US dollar may make US real estate more affordable for foreign buyers, including those from the UK. This could increase demand for US real estate and potentially reduce demand for UK real estate, leading to lower prices in the UK.
Another data point supporting this is the fact that the UK has recently seen an influx of US real estate investors who have shown an interest in luxury UK properties. This was supported by a strong dollar. However, if the US dollar is weak, US buyers may have less purchasing power to buy property in the UK. This could lead to a decrease in demand from US buyers, which could put downward pressure on UK housing prices.
3. Cost of living crisis
The UK has been in the depths of a cost of living crisis for several years. As a result, people have less money to spend on housing, which has directly affected consumer demand. This could cause the cost of housing to fall.
As well as this, if the cost of living continues to increase, people may have difficulty keeping up with mortgage payments or may be unable to afford a home altogether. This can lead to a rise in foreclosures and distressed sales, which can increase the supply of homes on the market and put downward pressure on prices.
While the possibility of a complete housing market crash is still up for debate, there are certainly a number of signs that point towards lower house prices in 2023. This could come as a relief to first time buyers.
