2023 - How is it for you?
You will have seen in The Press that the number of residential property transactions came in at just over 77,000 in January and that represents a reduction of 7% year on year, or 27% less than in December. When we allow for seasonal adjustments etc, the figure increases to just under 97,000 and reductions of 3% and 11% respectively. So does this mean the property market is grinding to a halt?
Most observers expected the numbers to fall on the back of what happened last autumn and predict further reductions in the numbers over the coming months. Next we will see the usual increase from around the middle of the year as activity increases and hopefully we will mirror the results of 2022. House prices typically follow the transactional curve and so we could expect a slight reduction in prices over the next few months before they increase again in the later half of the year and end up even or higher at the end of the year.
Interest rates have had an interesting start to 2023 and whilst the Bank of England Base Rate has increased by 0.50% to a 14 year high, fixed rate mortgages have dropped considerably since Jeremy Hunt became chancellor at the end of last year. Last week saw a barrage of sub 4% fixed rates for 5 years in the premium sub 60% loan to value sector as lenders compete for a bigger piece of the smaller pie of activity.
The debate of fixed versus variable rages on and whilst the cost of fixed rate money is improving, encouraging market data is suggesting a Base Rate Cap at 4.5% (a further increase of 0.50% in 2023). The conundrum then becomes when the Base Rate will peak, when will it start to go down and how quickly will that happen? And so at present we have the old adage from blackjack and do we stick or twist. Stick with a fixed rate for peace of mind and to help you budget, or keep playing the variable rate and hope your persistence pays off.
So if we were to summarise 2023 so far, I think it has been a draw. We have seen wins with lenders competing for market share and lowering interest rates, but the Base Rate rose too. Activity is low in the housing sector, but that may force more realistic asking prices from Estate Agents and kick start the 2023 market. The weather in 2023 has been milder and less energy will have been used, the cost of wholesale energy has reduced and we should start to see the benefits soon. Inflation has dipped, but is still way too high and we need a sustained periods of lower energy prices to bring this down further. To counter this, businesses are suggesting they will be employing less staff in 2023 but paying them more to work harder. So, will these wage increases keep inflation high?
Every yay has its nay in 2023 and all we can predict so far is that it is not going to be dull!