The flight to rural and coastal areas looks to be shifting into reverse as buyers begin migrating towards towns, cities and urban areas.
Zoopla’s Executive Director - Research, Richard Donnell, says “The dynamics that have shaped the housing market over the last 5 years are shifting.
“We expect affordable urban centres to fare better than average in 2023 but the inner London market may require another year before it is ready to rebound.”
Since the pandemic began in spring 2020, buyers - freed from the daily office commute - have been casting their home-searching nets further afield.
Rural and coastal areas, beautiful locations with pleasing home-office views, were in hot demand as buyers went on the hunt for more space in idyllic settings.
Competition for the perfect new home became fierce, with buyers willing to pay well over the odds to secure their next hot property.
That surge in demand inevitably pushed up prices, with some of the largest gains in house prices seen across Wales, the South-West, Norfolk and East Kent.
Now, thanks to cost-of-living pressures and rising mortgage rates, affordability and value for money are playing a much greater role in determining what buyers are looking for.
And we believe these two factors will continue to be the big key drivers for the housing market in 2023.
Flats, cheaper to heat and run, in affordable urban areas, with plenty of jobs and services, have become a more appealing prospect for buyers at a time when living costs are running at such a high.
Winds of change blowing towards towns and cities
The shift from rural and coastal homes to urban homes is set to continue throughout 2023.
A greater slowdown in demand and sales has been seen across the beachside locations of East Kent, Torquay and Portsmouth - as well as the wider Lake District area (the Lancaster postal area) and mid-Wales (the Shrewsbury postal area) throughout 2022.
These markets are all slowing off a high base of activity but it now looks as though the initial wave of pent-up demand, brought about by more working from home and a spike in retirement, has run its course for now.
Conversely, major towns and cities including Bradford, Swindon, Coventry, Crewe, Milton Keynes and Southend are all registering above-average demand.
These areas all have their own employment base, but they also enjoy good transport connections into much larger employment centres, such as London, Leeds, Manchester and Birmingham.
We believe employment growth will continue to stimulate housing demand in these affordable city regions throughout 2023.
Urban areas to fare better in 2023
Influenced by mortgage rates, household incomes and the actual level of house prices, buyers are being priced out of the more expensive markets, preferring to look in areas where homes are more affordable.
Increasingly keen to secure homes in urban settings, where jobs are being created and more services are available, buyers are now showing a stronger preference for towns and cities.
The popularity of family homes in city suburbs and commuter areas is also on the up, with demand for homes in these areas rising to above average levels over the last year.
Affordability is the key to the outlook for house prices
Affordability and value-for-money will be the big key drivers for the housing market looking ahead into 2023 and beyond, influenced by mortgage rates, household incomes and the actual level of house prices.
The more unaffordable a market, the greater the number of households who are priced out, weakening demand and impacting sales volumes and pricing in these areas.
In affordable markets with lower average house prices the opposite is true.