Housing market outlook for property investors

With a rapidly changing political landscape, businesses impacted by supply chain issues, rising inflation and the start of the cost-of-living crisis creating uncertainty, 2022 could be considered a politically and financially-turbulent year for many. However, the UK property market was an oasis within an ocean of uncertainty, marked by house price growth and rent increases.

Property investment has historically been one of the more stable investment options, providing consistent returns and capital growth over the long term for property investors.

But markets do change – so what comes next for the UK property market and property investors in 2023?

While it’s impossible to predict markets with guaranteed accuracy, broader trends are likely to impact property in the coming year, potentially setting the scene for the rest of the decade.

While constrained finances are likely to continue to dominate the news cycle – with food inflation hitting recent highs – broader economic, sustainability and market demand are trends worth keeping an eye on.

Here are five trends that property investors should have on their radar for the rest of 2023.

5 market trends for property investors in 2023

1. Sustainability transparency will make green properties more attractive

With 43% of UK adults reporting being concerned about the environment, property purchasing could be impacted by increased awareness of green issues and specifically renewables in a bid to reduce energy costs. Sustainability credentials are likely to be high on the agenda for property investors and developers, too, as the UK government pushes to meet its Net Zero objectives to Build Back Greener.

Greenwashing – false advertising and marketing that persuades the public that a product, service or business is environmentally friendly – can be a challenge within the property development industry, according to CBRE, which puts pressure on developers to disclose sustainability practices.

Increased transparency could help direct capital towards greener development schemes and accelerate their appeal to sustainability-conscious investors and buyers.

Upcoming requirements such as TCFD disclosures and net zero transition plans will showcase how property development businesses plan on reducing climate-related risks.

With the rise in energy prices, the renewed attention and interest in energy-efficient properties could incentivise investors to consider where they invest their money.

Read our guide on why sustainable investing should be part of your investment strategy.

Discover Acorn Green - Acorn Property Group’s initiative to drive down the carbon footprint of homes and build sustainable housing for the long term.

2. More overseas investment in UK property

In the last few months of 2022, the Pound fell to a record low due to political uncertainty linked to economic growth policies. While this has triggered a reigning in of consumer spending, it has provided overseas investors with the opportunity to invest in UK property.

Although the Pound has stabilised since the start of 2023, it still hasn’t recovered to pre-2022 levels, potentially creating an opening for overseas investors to invest from outside the UK.

With the Pound predicted to remain low throughout 2023, the current industry prediction expects the £/€ value to be around £1.075 – lower than the current conversion rate.

With other popular property markets, such as Hong Kong, in the middle of a similar slump, the UK could prove an international bright spot and an ideal investment opportunity in property.

3. Growing student numbers driving up demand

With a record number of university applicants in the UK in 2022 and those numbers expecting to grow further, there is increased pressure on student accommodation, especially in the private sector. The demand for Purpose-Built Student Accommodation (PBSA) may open up further opportunities for property investors in 2023.

The demand for PBSA is fueled by the increased taxation and regulation of student accommodation, limiting supply. Although the two could be viewed as complementary, the new PBSA developments target a different customer base.

Several factors are slowing the building of PBSAs, such as rising building costs, increasing operational costs and the planning system. However, cost issues may ease if inflation falls over the coming 12 months. The repurposing of existing buildings, such as disused office buildings, into student accommodation, could be a potential trend.

With some of the top-performing universities in the country, the South West is a prime location for property investment. Find out the many benefits of considering investing in property in the South West.

4. Increase in build-to-rent properties

Rising mortgage costs due to higher interest rates, coupled with the cost-of-living crisis, could make it harder for first-time buyers to get on the first rung of the property ladder. This means there could be a refocusing on renting, providing property investors with the opportunity to invest in build-to-rent properties (BTR).

The trend is likely to impact first-time buyers the most – homeowners looking to downsize, release capital or move to a larger family home may be less impacted.

It's important to remember that BTR developers are not exempt from the increased cost of materials through continued supply chain issues into 2023.

There is some political pressure in this area to keep an eye on, too, with the UK government implementing a 7% rent cap for 2023/24.

Developer vs investor – read our guide on the difference between developers and investors.

5. House price growth is slowing – but expect the market to improve

Throughout 2022 UK house prices steadily increased, resulting in the average UK house price reaching an all-time high of £296,000 (a £33,000 increase compared to the same period in 2021).

Although at a slower pace, 2023 has still seen a slight increase in house prices.

The longer-term view is optimistic, with Savills predicting that house prices are likely to rise by 6.2.% by 2027.

Why invest with Acorn?

If you’re looking for an alternative approach to investing in property, Acorn Property Invest offers investors the chance to be part of upcoming developments from Acorn Property Group. With regular fixed-income payments or capital growth through fixed returns and profit share options, find out how to start investing with Acorn Property Invest.

Your capital is at risk if you invest

Investment opportunities available via Acorn Property Invest are exclusively targeted at exempt investors who are experienced, knowledgeable and sophisticated enough to sufficiently understand the risks involved, and who can make their own decisions about the suitability of those investment opportunities.

All investors should seek an independent professional investment and tax advice before deciding to invest. Any historic performance of investment opportunities is NOT a guide or guarantee for future performance, and any projections of future performance are not guaranteed.

All investment opportunities available via Acorn Property Invest are NOT regulated by the Financial Conduct Authority (FCA) and you will NOT have access to Financial Services Compensation Scheme (FSCS) and may not have access to the Financial Ombudsman Service (FOS).