UK Housing Market 2023: All That Investors Need to Know

UK Housing Market 2023: All That Investors Need to Know

In the last five years, the UK housing market has consistently been in the headlines, with house prices seeing considerable growth and capital appreciation. 

According to RWinvest, the property is historically one of the most consistent and reliable forms of investment, with house prices generally showing solid capital appreciation over time. This was most apparent in 2022, as house prices and rent grew by an impressive 12.6% by the end of the year. 2020 also saw flourishing returns in the market – causing a boom that lasted until the end of last year.

Alongside this cycle of growth, however, the market has also seen some volatility and steep price drops during severe economic trouble. 

At the tail end of 2022, it was predicted that this year would see something similar, eventually dovetailing into a complete market crash. 

How accurate are these claims, and what does anyone looking to get involved with property need to look out for? 

Price Growth is Expected to Decline, But Future Growth Can Still Be Expected

As mentioned, 2022 proved to be a particularly prosperous year in terms of capital growth, with house prices continuing to build up throughout almost the entirety of the year.

At the end of December 2022, the average house price was £292,127.

Looking back at the same time in 2022, this is an increase of 8.96% — so you have some idea of the sizeable level of growth.

In some areas like the North West, even higher levels were recorded, with the likes of Manchester and Liverpool becoming prime property investment hotspots.

2023, however, seems unlikely to completely replicate this progress of prosperity.

The significant driving aspects behind this growth were the way the economy recovered post-pandemic, as well as the high demand for homes vs the low supply.

Now two years after the pandemic, the economy has mostly recovered from the more significant effects of lockdown, and the rapid leap in house price value has also butted heads with the ongoing cost-of-living crisis in the country.

This means that while there is still a considerable demand for housing, it has mostly become unaffordable for many buyers at the current inflation rate and rapid increase in house prices.  

With this in mind, it is unlikely that house prices will grow at the same rate experienced in 2022, perhaps even slowing slightly throughout the year.

The latest report from property experts Savills sees that house prices could drop by around to 10% across the whole UK in 2023 — but this is not necessarily a cause for any alarm.

Many experts suggest that investors view this as a natural “reset button” in which houses will become more affordable for a period. This forecast also sees that UK prices will increase overall by 6.2% by 2027, meaning that if the value slips slightly, it doesn’t necessarily mean it’ll be a permanent change.

For example, at the start of the pandemic, UK house prices in 2020 saw a temporary dip in value, with averages falling 0.6% between March and April.

By the end of the year, property prices had risen to astronomical levels and started a property boom that lasted well into 2022 and saw many investors making massive capital growth returns.  

Investment in the North West will Remain Strong

Over the years, the North West has proven to be one of the best areas for investment.

Cities like Liverpool and Manchester have presented consistently growing young populations, offering some of the best universities in the UK, affordable prices and impressive rental yields.

Last year, for example, Liverpool saw prices rise from just over £18,000 to just over £180,000 in just 12 months — an obviously rapid growth that remains incredibly affordable compared to other popular UK cities.

When you consider the always-growing student population in the area and the major ongoing regeneration schemes, it’s easy to understand why so many investors flocked to North West cities like Liverpool in 2022.

Despite the slight decline that the housing market is expected to face this year, the North West and cities like this are predicted to come out strong on the other side.

Savills predicts that the North-West will see a 5-year growth of 11.7% — the highest level of development of any region in the UK. 

This means that the North West will likely stay as one of the best areas for UK property investment for the foreseeable future.

Mortgages Should Be More Affordable

The latter half of 2022 saw skyrocketing mortgage rates in an effort to fight rising inflation. At the end of October, mortgages saw a 14-year high, not calming until November. Even then, the rates to obtain a six-year mortgage were at an uncomfortably high 5.95%.

In the past, buy-to-let mortgages traditionally saw larger interest rates than typical residential mortgages due to their higher risk.

If the interest rates continue to rise, then mortgages for buy-to-let properties could become unaffordable for most investors in 2023.

It is expected; however, that rates will calm slightly throughout the year. As of May 2023, the average 2-year fixed rate is now 5.28%, and the average 5-year rate is 5% — a slight improvement on the rates seen at the end of 2022.

While these numbers have fallen over the last few months, there is still no way of definitively knowing how things will unfold by the end of the year.

One thing for certain is that experts doubt we could see a return to the lower rates witnessed through the pandemic.

Given this, an alternative for investors is to consider buying off-plan properties.

Properties like these are still under construction, meaning they have significantly lower prices than fully built developments.

They also supply flexible payment plans, meaning that most investors can avoid borrowing a buy-to-let mortgage and save a huge deal of money in the long run. 


As 2022 came to a close, the UK housing market faced significant uncertainty. However, prospects for 2023 appear promising, with indications of profitable and exceptional investment opportunities looking ripe for picking. 

The demand for property is continuously rising, and certain regions like the North West are projected to see a price growth of 11.7%, which could present an ideal window for investment before the market becomes too crowded. Nevertheless, it is vital to exercise caution and care when venturing into any form of investment. Take time to conduct thorough research, weigh all the options, and make an informed decision before signing on the dotted line.

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