Make Or Break? What Does 2023 Have In Store For Luton's Property Market?
We don’t have a crystal ball (we’re good, but even our property ninja skills have limits) but at Penrose we know one thing for sure: Luton’s property market is one of the most robust in the UK. No matter what 2023 throws at us, our housing market will not just survive – it will thrive. Here’s why:
Media Hype Doesn’t Always Reflect Reality
The media are full of hype, especially when it comes to property prices. But it’s important to remember that they don’t have crystal balls either. They just like to talk as if they do.
So, when their headlines are full of doom and gloom and predictions of catastrophe for the UK housing market, we need to take step back and consider the facts as they relate to Luton. This is our home. We know it better than any faceless journalist in a cushy London office.
Luton Today did well with this in September when they reported that the 0.2% drop in Luton house pricesagainst the previous month did not accurately reflect the long-term trend – which showed strong growth. It was a temporary dip. It’s easy to take numbers out of context, so what should we believe?
The Truth Lies Behind The Headlines
Mortgages
Numerous respected sources like Nationwide, Zoopla, and the Financial Times are predicting that overall the UK housing market will see prices drop by around 5% in 2023, and up to another 5% in 2024, before starting to recover.
That’s a 10% drop in two years. Big number. But let’s just put it into context:
In 2020, the Office for National Statistics (ONS – super brainy and very reliable government source) reports that the average UK house prices rose by 10%. They then rose again by another 9.6% through 2021. That’s around a 20% rise in two years.
That’s the Covid effect. And it was always unsustainable. It was inevitable that this blip would correct itself at some point – or everyone would be priced out of the market and we’d all be down the Mall hitting Trespass for tents and camping gear.
All the market needed was a catalyst to rein it back in – the combined bombshell of Putin, Truss and a GCSE Economics budget were just the ticket.
So Luton house prices are going to fall in 2023. And in 2024. But at worst, it’ll only take us back to where prices were at around mid 2020 – which is still a little higher than pre-pandemic levels.
Mortgage Interest Rates
We all know it’s not just how much a property costs, but how much our repayments are. The headlines say that mortgage base rates are predicted rise to 4-5% in 2023 – up from those lovely pandemic lows of 1-2% that we’ve all been enjoying. They say that they could climb much higher.
So what do these predicted rises really mean? You know the drill – the very low levels were unrealistic and never going to last. They were designed to keep the economy ticking over while the world fell apart. A rise was always going to happen. But to what extent?
The mortgage base rate is now expected to settle at around 4-5% in 2023. Higher than they have been, yes. But, crucially, it’s unlikely to hit double figures.
Inflation might be high, but employment still is too, and although the real value of wages has taken a hit, it’s nowhere near as bad as it could have been. This, along with more market faith in the new Chancellor, means that once they’ve climbed a bit, interest rates are likely to remain steady.
Now why didn’t they make a headline about that?
Luton’s Unique Position
Now we understand what we’re dealing with nationally, we can add in the Luton Effect. We are in the unique position of being close to London, having fantastic travel connections, and having retained pricing levels that are still within reach for ordinary people.
Historically, because of these benefits, the housing market in our town has bounced back from times of economic turbulence swiftly, and decisively. We see no reason why this time will be any different.
Our housing market will keep ticking over because:
- The rising costs of living in London especially will continue to drive people out of the city and into the suburbs. Affordable and accessible, Luton remains a great choice.
- General housing demand in Luton continues to outstrip supply.
- In Luton we have a population peak in the 25-45 year old range. This is the demographic of growing families, and workers – as the kids grow so does the need for space, and those in employment are best placed to afford such a move.
- In a fluid market like Luton’s, price drops are rarely an issue – selling and buying prices have both dropped, so no one loses.
Let’s Get Personal – Individual Circumstances
As well as the Luton Effect, the housing market here will obviously be influenced by us, the residents of our town. Buyer and seller behaviours can be hugely influential, and we’re already starting to see customers reacting to the following market drivers. This gives us the confidence to know that you will keep our town’s market moving through 2023:
- Mortgage rate lottery – with rates expected to settle at reasonable levels, some homeowners are seeking out stability with new fixed rate deals, others are actively making a move now before things change again
- Moving from Rented to Owned – some buyers are looking to make the leap from rented to owned (mortgages are typically more affordable than rents – even at the new, higher rates)
- The Covid Effect – the search for outside space and home offices continues, especially for buyers moving out of London
- First-Time Buyers – a dip in prices makes homes more affordable for those taking their first steps on the property ladder, which will filter all the way up the property chain to keep things moving.
- Stamp duty – thresholds have been increased for Stamp Duty payments (until 31st March 2025), doubling the rate at which it becomes payable for everyone to £250k, and improving relief thresholds for first-time buyers too
Summary
We predict that 2023 is going to be a year of tentative market stability in Luton.
Yes - the cost of a mortgage is going to increase. Yes - house prices will drop back a bit. But as we’ve shown above, these things will not hold Luton’s property market back. It’ll simply force us all to look for new ways to make it work.
And at Penrose Estate Agents will be here alongside you for the ride. By voting us Best Selling and Letting Agent for the East of England in the 2022 ESTAS you again humbled us with your trust and support.
Your Agent of Choice in Luton is in it for the long haul. Get in touch with us today for all your property needs – we’ll be glad to have you along for the ride.