Get the latest information on the UK property market, forecasts from leading banks and building societies, and what it means for buy-to-let investors searching for property in 2023.

This property market update covers: 

• What the current market signals suggest

• Inflation’s role

• Current mortgage rates for buy-to-let finance

• What might happen to UK house prices in the future

House Prices

The latest data from the Halifax Building Society suggests that house prices may be rising again. An annual house price increase in March of 1.6% reveals that a typical property now costs £287,000, which is a £2,000 increase from February. The report indicates prices appreciated for the fourth consecutive month, contradicting earlier surveys from Nationwide and the Office for National Statistics (ONS). 

Even so, house price appreciation remains weak. The 1.6 per cent figure recorded last month stands well below the 12.5 per cent property rise seen in June 2022 when growth peaked. 

Month-to-month, prices rose by 0.8 per cent in March, according to Halifax, down from 1.2 per cent a month earlier. Easing mortgage rates may be responsible for the improving investor situation. 

Inflation

The ONS reports that inflation may be easing. The consumer price index (CPI) rose 10.4 per cent in the 12 months to February 2023, significantly below the peak of 11.1 per cent in October 2022. Data suggests prices are rising by 1.1 per cent per month. 
Lower inflation may cause the Bank of England (BoE) to reconsider decreasing interest rates, which could help house prices rise faster. However, on 23 March 2023, the BoE raised interest rates to 4.25 per cent, and the market is pricing in further rises throughout the summer of 2023. Therefore, mortgages may become harder to obtain, putting downward pressure on what people can afford.

Current Mortgage Rates For Buy-To-Let Finance

The mortgage rate for buy-to-let properties remains historically high, averaging 5.81 per cent. However, high inflation is offsetting these rates, enabling investors to ask for higher rentals. Even so, affordability considerations may cap how much tenants can pay, potentially squeezing yields.

What Will Happen To UK House Prices In The Future? 

The Office of Budget Responsibility (OBR) predicts that UK house prices will fall by around 10 per cent over the next two years, with Lloyds Bank foreseeing a 7 per cent fall. The expert consensus is for a slight correction, but not a crash, about half the size of the fall seen during the 2008 financial crisis. 

However, the prices we see two to five years from now will depend on the real interest rate. If inflation remains high but rates fall, mortgages could become dramatically cheaper. Higher incomes will offset larger interest repayments, leading to a rebalancing of supply and demand. Therefore, buy-to-let investors may want to view the current hiatus in house price appreciation as an opportunity to buy.