Property market predictions: winners and losers in 2023
Lisa Isaacs asks property experts for their forecasts on who will survive, thrive and succumb in 2023.
Tom Staff at Spectre
WINNERS: E-money
“E-money will take lettings by storm in 2023. This technology is behind many of the new app-based banking brands, allowing regulated companies to create and administer real bank accounts electronically via an API. Street.co.uk is utilising this technology to provide tenants with unique bank accounts that they can pay rent into. This will eventually remove the need for reconciliation and associated tasks, such as arrears chasing and payments to landlords/contractors. Not only will the technology create huge efficiencies for agents but it circumvents the major banks’ reluctance to create or maintain client accounts for letting agents.”
LOSERS: Online agents
“Online agents will lose market share in 2023. As the market tightens and properties take longer to sell, fewer homeowners will entrust the sale of their properties to online-only operators. In addition, CRMs are stepping into the fray by increasingly adding features that cater to modern consumer expectations, such as online booking and native mobile apps to manage the moving experience.”
Kristjan Byfield at The Depositary
WINNERS: Agents on the acquisition trail
“The agency acquisitions space will likely be quiet in the first few months of 2023 but, as agents are expected to see a tougher sales market impact revenue and profits, the likelihood is acquisition activity will ramp up considerably as the year progresses. A growing number of agencies will struggle financially and ambitious agents with deep pockets will look to take advantage of their market position.”
LOSERS: Tenants
“We will continue to see rents rise even further in 2023, due to the imbalance of demand and supply. The pressure of increased living costs and fears of a recession will also mean a rise in rent arrears and evictions. The final version of the Renters Reform Bill will also trigger more landlords to leave the sector, deepening the supply crisis further and reducing the choice for tenants.”
Neil Cobbold at Payprop
WINNERS: The Government
“Although we still have a shaky political backdrop, I think now we have Michael Gove, Secretary of State for Levelling Up, Housing and Communities, back at the helm, we are definitely going to see the Renters’ Reform Bill white paper take shape before the end of 2023. Some tenants also stand to be winners, as we could be looking at some regional rent freezes.”
LOSERS: Poor value letting agents
“The biggest challenge for letting agents in 2023 will be attracting landlords who don’t already use professional services. Agents will need to demonstrate their value in protecting and managing an asset. This will be hard as it’s a fee-attracting service in a climate of increased borrowing costs and higher levels of taxation.
Peter Burnham at NicheCom
WINNERS: Professional marketing
“Buyers are going to consider their purchases more carefully, therefore it will be paramount for agents to present their properties in the most attractive light possible. The recent results of the EA Home Buyers Survey confirmed what we have been saying for many years. A consistent and quality property marketing approach is no longer a choice but an absolute necessity – even more so in a market where there will be fewer opportunities to shine.”
LOSERS: Time-pressed agents
“We all expect a return to more normal conditions this year and this means a typical 19 viewings prior to offer. As such, agents will need to work smarter, carrying out virtual viewings in the first instance to filter out time wasters, reduce time on the road and minimise petrol costs.”
Agents will have to work smarter, carrying out virtual viewings to filter out time-wasters.
Richard Abbots at Inventory Hive
Winners: Responsive property managers and landlords
“Tenants now have multiple ways of reporting property maintenance issues, without the fear of eviction. This actually presents property managers with an opportunity to respond responsibly and transparently to not only protect their reputation but also to protect their clients’ housing stock. Increasing complaint levels may also motivate developers of buy-to-let properties to introduce more energy efficient measures to protect the health of their tenants, and also protect the longevity of their assets in the future.”
LOSERS: Poor quality rentals
“With the recent English Housing Survey exposing the proportion of private rented properties falling short of the Decent Homes Standard, we expect to see more action throughout 2023 from tenants, landlords and agents with regards to damp and mould. The impending updates to FFHH (Fitness for Human Habitation) will continue to increase awareness of the links between health and property standards, which will inevitably lead to more complaints and, therefore, change in the sector.”
Mary Beeton at Hamptons
WINNERS: Sellers
“It’s likely the first half of 2023 will be more challenging thanks to the current cost of living squeeze and higher mortgage rates. This may turn some buyers off and make owners wary about putting their house on the market. However, even if we see small price falls in 2023, it’s still likely that more than 90% of those who sell a home this year will make a profit, and many will gain more than they lose if they are moving up the property ladder. Turning our attention to buyers, international investors in prime central London and cash purchasers, mostly downsizers, are set to play a crucial role in 2023 – the latter selling in response to the soaring cost of running larger homes.”
LOSERS: Transaction numbers
“Overall, it is transactions that are likely to take a bigger hit than prices this year, with buyers and sellers pressing ‘pause’ and pondering their strategies for the new interest rate environment. The three Ds – debt, divorce and death – will be the reason why most properties are put up for sale, with a 4th D credited to downsizing. Prices are less likely to see significant falls and there won’t be a huge ‘rush to sell’ that causes a more significant re-balance in supply and demand ratios.”
Cat Westerling at Hamptons Lettings
WINNERS: Landlords with manageable costs
“Overall, winners will be those landlords who own outright or bought some years ago, as they can rely on an equity buffer. There is some good news for landlords who need finance as the cooling of mortgage rates – alongside the expectation of buoyant rental growth – should keep investors in the game. We expect to see most landlords ride out the next 12 months.”
LOSERS: Highly-mortgaged landlords and investors, low yielding buy-to-lets
“Landlords will continue to re-evaluate their property assets in 2023. The more highly-mortgaged investors who bought more recently, will be the ones who may struggle to make the sums add up during the higher tax and borrowing rates of 2023. We have already seen some highly indebted landlords dispose of lower-yielding homes in favour of those that offer better returns.”
Overall it is transactions which are likely to take a bigger hit than prices this year, with buyers and sellers pressing ‘pause’…
Tracy Bradley at Haversley
WINNERS: Letting agents looking to sell
“Haversley deals with lettings agencies who continue to offer exceptional service and unrivalled expertise, despite continuing legislative complexities and cost pressures that are negatively affecting their own business and that of the landlords they support. Some agents will see 2023 as an opportunity to sell their business and pursue other interests or personal goals. Currently, our sellers are attracting high levels of interest from prospective buyers and strong valuations, even in these challenging times.”
LOSERS: Unfocused agents
“There is no doubt the rental market is facing challenging times as we move through 2023 but there will still be opportunities – but only for letting agents who focus on remaining compliant and efficient whilst supporting their customers. Demand for properties remains strong and I feel positive that good businesses will come through 2023 bigger, better and more profitable than before.”
Jake Gann at Bamboo Auctions
WINNERS: Chain-free property sales
“The market will stabilise; it always has. We foresee a more extensive adoption of different technologies and resources to adapt to an ever-changing market. As buyers and sellers look for more certain and quicker property sales, agents will increasingly turn to auctions for speedy, chain-free transactions.”
LOSERS: Sales progressors
“Mortgage rates have rocketed and house prices are dropping quickly – this year could still see another 5-10% decrease in property values. For agents, this means less stock, an increase in renegotiations and potentially more fall-throughs. Annoyed agents and anxious vendors will have to navigate buyers who are renegotiating, and an increase in down valuations and fall throughs will create uncertainty within chains.”
Jonathan Stein at Vaboo
WINNERS: First-time buyer market
“Whilst rising interest rates and the cost of living crisis may well put off many renters from buying a property, there is a real risk that rents will become more expensive than mortgages. Interestingly, 18% of respondents using the Vaboo platform since September have said they are looking to buy in 2023, with 33% buying within two years. As a result of rising rents, the first-time buyer market could well be buoyant.”
LOSERS: Jittery landlords
“With lettings legislation making life harder for landlords, many have already exited the market. Supply will continue to be an issue and we could see first-time buyers purchasing landlord-owned properties. Since the inception of Section 24 – and with additional legislation piled on over the years and the imminent removal of Section 21 notices – landlord profits will be largely wiped out.”
Rob Sabin at Miles & Barr
WINNERS: Canvassing and prospecting
“The best agents will continue to invest heavily in marketing in 2023, with a combination of physical tout letters and digital marketing campaigns running side by side. Generating regular brand awareness and promotional campaigns that drive a clear call to action will ensure that share of voice remains strong, with the potential to increase. Now’s the time to be creative and bold.”
LOSERS: Non-competitive agents
“The worst thing an agent can do is cut back their marketing spend in a challenging market, as it will lead to a downward spiral of fewer enquiries and ultimately fewer sales. Sellers will need agents with a proven track record of getting properties sold and achieving the best price for their clients. The best agents will be raising their fees and demonstrating the value that they add, which will grow their market share.”
Martin Cheek at SmartSearch
WINNERS: “The biggest winners this year will be those that invest time and effort into making compliance digital and adopting vital tools, such as electronic verification (EV) to protect their business, their reputation and the wider public. A dip in transactions, house price corrections and continued inflationary pressures will provide agents with a valuable opportunity to re-evaluate their business and overhaul their compliance procedures, especially as the property sector continues to be targeted to launder illicit funds.”
LOSERS: Digital resistors
“Digital compliance and frictionless onboarding for customers in 2023 will help agents avoid a PR disaster for the sector. As the economic outlook hopefully improves further into the year, with buyers regaining their confidence and returning to the market, digital wins will put agents in the best position to maximise every opportunity and make a success of the year.”
