Property Auction Market Forecasts 2023

If last year proved to be one of the most difficult-to-call years for the property market, then 2023 looks likely to be even more difficult to forecast. Factors such as inflation, the cost of living and mortgage rates amongst others will all play a part in deciding how house prices move over the year.

While some property commentators might be forecasting a price crash others are predicting a more modest adjustment – with some even suggesting the market will hold up well.

The property auction market is, however, often said to be something of a barometer for the property market generally. With that in mind, we have asked a number of property auction experts to give their views on how they think both the property and auction sales market will fare in 2023.

Gary Murphy, Auctioneer and Founder of Allsop Residential Auctions

“Allsop’s last residential auction sale of 2022 was held on 15 December. The last auction of the year raised £50.3m from a sale of 141 lots with a success rate of 83%. This brings the total raised for 2022 to £372m from over 1,000 sales with an overall success rate of 80%.

The challenges the economy has faced over the year have been well documented. The aftermath of the pandemic, political instability, Russia’s invasion of Ukraine, Liz Truss’s disastrous mini-budget, increasing interest rates, expensive building materials, the cost of living crisis, spiralling inflation, rising unemployment, and widespread strikes have all taken their toll, not least on the residential property market.

Despite this, our virtual auction rooms have continued to facilitate active trading. As ever, when times are tough, buyers resort to quality – good buildings or sites in good locations at sensible prices. On 15 December, Piers Court in Stinchcombe, Dursley, Gloucestershire, a Grade II listed manor house, once home to Evelyn Waugh, sold for £3.16m. Five apartment blocks in Halifax comprising 42 flats – 29 let and 12 sold off – were purchased for £1.96m off a yield of 9.43%. And in Archway, north London, a vacant garage site without planning permission raised £1.28m.

There is no doubt that the market is undergoing a sustained price correction. Experience shows that auction results dip immediately after major events in our market – despite auctioneers’ efforts to persuade sellers that demand at the point of sale may not support their hopes or expectations. As reality dawns, and the evidence of value is laid bare by auction results, reserve prices at subsequent sales are set more realistically and sales success rates improve. In fact, many sellers will do well to price assets attractively in the first quarter of 2023. If values slide further, many may regret not having priced their unsold assets more modestly.

In 2023, first-time buyers will find the first rung of the property ladder even further out of reach. Existing owner-occupiers will face huge increases in outgoings. Those on fixed-rate mortgages will have escaped to a degree – but only for so long as their fixed periods last. Many buyers took advantage of the post-Covid stamp duty holiday from 1 July to 1 October 2021 and fixed-rate loans available at the time. But many of those fixed-rate periods will have come to an end a year later. Any tax savings made at the time of purchase were probably offset by inflated prices caused by the surge in demand. Now house prices are softening and repayments will have soared. With affordability impaired, there are likely to be defaults and potentially repossessions in 2023. Although, as with the 2007 recession, lenders will be strongly encouraged by government to exercise forbearance.

Buy-to-let investors will suffer additional difficulties. As of today, domestic private rental properties must meet a minimum Energy Performance Certificate (EPC) rating of E. In 2025 this will be changed to C for all new tenancies and from 2028 to all tenancies – even for those with longstanding tenants. For buy-to-let borrowers, failure to meet these standards could result in a breach of loan covenants.

Owners of flats may face cladding issues. Since 2020, all residential buildings of any height require a fire safety certificate (EWS1). Although some investors in this sector may be saved by rising rental values, the case for buy-to-let has altered considerably. With limited, or possibly zero or negative capital growth next year, net yield will be the all-important driver. According to the Office for National Statistics (ONS), private rental prices paid by tenants in the UK increased by 4%, and in London by 3.5%, in the 12 months to November 2022, representing the largest annual percentage change since this data series began in January 2016.

Agents in the more affluent areas of the Home Counties report that business remains buoyant and that prices are robust. During the pandemic, we saw a shift from London to more leafy commutable areas offering more space for living and home working. Post Covid, these working patterns have continued and appear to be the new normal. We expect that homes in the doughnut surrounding London will show capital growth in 2023.

We expect attractively priced assets to remain in demand in 2023. As private buy-to-let investors are squeezed out of the market by rising outgoings, the larger corporates may take advantage of thinner competition and escalating rental values. Cash-rich occupiers will seek out ‘value-add’ opportunities in the form of unmodernised homes. Sites with planning permission or potential for future development are likely to come to market at reduced prices as a result of increased construction costs. Ground rents will remain a stable investment in the longer term, although legislative reforms
and cladding issues may stimy enthusiasm.”

Jay Howard, Director at Hammered Auctions

“Being the start of the year, this is a really tricky question to answer. Primarily because we have yet to experience how the first tranche of auctions play out.

Traditionally, the February auctions set the tone for the auctions for the rest of the year. Now, this has been shown to be quite a shallow metric especially when you add Brexit, Covid, Stamp Duty Holidays and a war in the mix.

Nevertheless, most auctioneers will use the February auctions to set out their stall in terms of the quality of the lots they offer, how well those lots sell (comparatively to estate agency sales) and finally (and most ego driven) is the percentage of lots they sell.

Since this article is written towards the start of January, we can only use past results as a predictor of how the market is likely to perform going forward.

October, November and December 2022 wasn’t without struggles. Generally (and I mean super, generally speaking) income producing assets had been performing very well. This is over an asset that needs physical works/improvements (which historically, have been the best performing assets at auction) as everybody loves a cheeky home under the hammer TV show style refurb jobby.

Vacant commercial assets seem to have fallen down the charts of what is exciting to buy. Exceptions include those commercial properties that have granted planning or permitted development permissions.

Multi let residential and commercial properties still seem to be popular. Larger sized developments are moving slowly, even though there still seems to be plenty of appetite to build.

Assuming that there will be no massive industry, world, political or economic events over the next 12 months, then the market is still likely to settle and prices settle to pre-pandemic levels. It will be interesting and unsustainable for prices to continue to rise (mortgage rates and general affordability applying pressure) whilst supply has started to increase, the demand spread across those able to transact, means that competition is spread and price rises should start to calm.”

Phillip Arnold, Managing Partner and Auctioneer at Phillip Arnold Auctions

“The market certainly hit an abrupt halt at the end of September 2022. There have been various predictions about the level of property values, activity etc. However, signs coming back after the festive break are that there is activity out there and that maybe the doom and gloom predicted, may not be as bad as expected.

Time will, of course, tell and there will be a period to see what occurs. The property market is not like stocks and shares, whereby data is available in real time. I still expect to see transactions occurring although there will almost certainly be some adjustment to property values.

I see larger catalogues in 2023 with people keen to dispose of assets quickly.

However, I hold caution in that auctioneers should not just look at catalogue numbers and should be realistic with the stock taken in. An auction lot needs to be priced competitively and I am already seeing lots in catalogues that are not taking into account current market and economic conditions.

There will be a number of auction sales this year, of that I have no doubt, but my strong emphasis is to do what’s right for the client and only take in entries that will benefit from the method of sale. If not, then the high street estate agent is where that instruction should be.”

Russell Taylor, Director and Auctioneer at Taylor James Auctions

“I think the property market will be quite a mixed bag in 2023. I feel that there will be a greater supply of stock as people look to come out of long standing investments and I believe this will present a variety of opportunities to experienced investors.

I feel that the auction market will continue to grow with an increased amount of stock. However, pricing will be key and there may be a lower sales percentage of stock sold but with an increased amount sold.”

Andrew Binstock, Auctioneer, Founder and Partner at Auction House London

“It’s impossible to say with any degree of accuracy, but I think the currently accepted theory is that the market will continue to cool off for a few months and prices will either drop by a few percent or at best, remain steady until the summer.

I imagine Q1 will continue to see a continuation of where we ended 2022, ie. with good levels of stock for sale but a smaller than normal audience of buyers.

Ultimately supply and demand will always mean that property in the UK remains the safest investment vehicle compared to the stock market. I imagine the next few auctions will have less bidders per property than this time last year. But for well priced stock there will continue to be a strong appetite amongst auction buyers.”

Adrian Little, Senior Partner and Auctioneer at Mark Jenkinson & Son

“There will be the inevitable caution, fuelled by constant negative reporting in the media and a readjustment in price levels as a result.

However, such have been the increases seen across the residential and commercial sectors since the start of the pandemic any fall will be from a great hight. And even if it settles at a lower level prices are likely at the worst to be above pre-2020 levels.

If our January auction is anything to go by, I think it will be ‘business as usual’ for reputable auctioneers who are making the adjustment from a seller’s to a buyer’s market.

Builders, investors, developers and ‘property people’ don’t suddenly give up – it’s their livelihood and they need their next project.

Sellers are more likely to be motivated and the chances are that there will be a greater supply of opportunities coming under the hammer.

On the whole, I’m cautiously optimistic.”

Andy Thompson, Auctions Director at SDL Property Auctions

“Auctions are always a good barometer of the property market. They show market trends on the day.

We have seen a slowdown in the market already, although there are definitely still many buyers out there if the price is right. We ended the year really well and we are already seeing big numbers for our January sale.

My forecast for 2023 is that, although I suspect inflation has peaked, the market will continue to soften. We are already seeing more instructions via estate agents for example. There will probably be more pressured sales coming to auction.

Auctions tend to do well in both firm and soft markets. But softer markets are where they particularly come into their own as sellers increasingly look for speed and certainty of sale.

The pandemic served to bring auctions to the fore. Online auctions meant more people could follow the bidding and more people could bid more easily. This is a development which will help to support the interest in buying at auction going forward.

I expect we will be very busy in 2023 and we will have more private clients.

When it comes to guide prices auctions always favour the brave. Attractive guide pricing alongside extensive advertising and marketing are amongst the best ways to generate interest and achieve the best possible selling price.

However keen pricing is especially important when the property market is down and sellers this year will need to be mindful of this.”

Guy Charrison, Director at Network Auctions

“The experts predicted a disastrous property market as we entered the Covid pandemic. As we all know the opposite happened, so we certainly understand that predicting the market can be tricky.

Having experienced the last years with very high levels of transactions, and seeing multiple bids on many properties as they came to the market, it is natural that in the normal cycle of things private treaty volumes will decrease.

The speed at which interest rates have risen, again against the comments earlier in 2022 that ‘low interest rates are here to stay’, shocked the markets. The confidence of buyers and the lack of mortgage products is still an issue. But it seems more, particularly in the buy to let field where hundreds of products were wiped away in a matter of days, are being re-introduced.

So how will the market perform in 2023? Well, the cost of living increases and the substantially increased cost of borrowing money have damped the market for sure.

It is always worth remembering, however, that quality properties will always sell. Access to good schools, perhaps the ‘Waitrose effect’ and access to transport are still desirable. But the more average property where there is more choice will naturally become more difficult to sell.

Estate agents I speak to report two markets: The media market and the real market. And the numbers reported from Rightmove seem to show that whilst there have been more price reductions, in the real market properties are still selling, but are more price sensitive.

The property auction market traditionally does better in a downturn. David Sandeman, Founder and Managing Director at Essential Information Group (EIG), reports that auction volumes in 2022 increased more than 10% over 2021 – and expects auction volumes to increase further still in 2023.

Everyone is aware that despite the increase in technology in the last 25 years, it takes the average conveyancing lawyer to transact a private treaty property transaction longer now than it did a quarter of a century ago. Speed and certainty are the big attractions of selling land and property by auction.

At Network Auctions we regularly sell, and by sell I mean exchange contracts, on the sale of our clients property within 14/21 days of receiving the instruction to sell. That is attractive to both the sellers and the buyers and we often joke that is quicker than the average time it takes for many lawyers to even acknowledge instructions in a private treaty sale!”

Speed and certainty are the big attractions of selling land and property by auction. At Network Auctions we regularly sell, and by sell I mean exchange contracts, on the sale of our clients property within 14/21 days of receiving the instruction to sell.

That is attractive to both the sellers and the buyers and we often joke that is quicker than the average time it takes for many lawyers to even acknowledge instructions in a private treaty sale!”

Andrew Brown, Director of Auctions at Strettons

“I think that the auction market in 2023 will be something of a rollercoaster; with the beginning of the year likely to carry on where 2022 left off. The market uncertainty that stems from the cost of living crisis and the wider fall out of the conflict in Ukraine means that the gap between a seller’s expectations and what a buyer is prepared to pay that we saw at the back end of 2022 could remain for the February and March/April round of sales. As it was during the credit crunch of 2008, it may be a little while until the equilibrium is restored.

During this time, there is a tremendous opportunity for the bold investor to seek out deals that look like good value and benefit from a decrease in competition. Sellers too can work the current market to their advantage; we’ve seen some very strong selling prices for lots that have been offered with keen guide prices/reserves. This has been due to buyers gravitating in great numbers to lots that stand out in this respect.

It is anticipated that as we move into spring, there may be an uptick in the number of distressed assets hitting the market; which will be good news for buyers and those with cash to invest, but this is also likely to bring increased competition for lots, so this could be a benefit to private sellers, too. Depending on what happens in the wider economy and world, we could see a return to a relative normal as we get into the autumn and winter, but until that time I think that it is the bold buyer and the realistic seller who stand to gain most in 2023.”

Ruban Selvanayagam, Co-Founder at Property Solvers Auctions

“Property Solvers operate in a unique position as both direct home buyers and auctioneers. At the time of writing, we’re seeing more sellers appreciate that the post-Covid / cheap debt / stamp duty holiday-induced trends of strong capital appreciation are gone – at least for the foreseeable future.

However, many remain anchored to over-exaggerated price expectations and it’s often a case for the market or a surveyor to demonstrate that a downturn is underway. Others are simply deciding to withdraw and wait for things to improve down the line.

The illiquid nature of private treaty sales continues to attract more sellers to the fast sale / auction space. With modern method / more flexible options becoming more accepted, using a competitive bidding platform does not always translate to a trade-off on price – provided that guide and reserve price levels are set realistically.

This coming year, we believe that highly leveraged single let and HMO landlords stuck on unfavourable variable rates with poor cash flow may well look to auctions to dispose of their poorly performing properties. We also expect commercial and mixed-use auction lots to rise across the UK.  This ‘investor’ stock could see the most amount of volatility – particularly as many buyers will be using higher lending rates as a key bidding strategy driver.

Macro-wise, although it’s fairly safe to assume inflation will come down (which should, theoretically, have a positive effect on borrowing rates), the issue could be more challenging to tame than many believe – particularly with persistent wage growth pressures. The upside here is that repossessions may not peak as high as some commentators are predicting and for landlords, fair rental increases may balance out some of the rising liabilities.  As mentioned above, with homeowners simply choosing to sit on their hands alongside the ever-rising housing deficit, the net effects of low market supply could result in a flat market (rather than any major crash).  These things are always hard / impossible to predict though!

From an auction pricing perspective, much will therefore depend on the depth of the recession and the potential impacts of any ‘black swan events’ that may occur. We’re therefore advising sellers to adopt a ‘price to entice’ strategy with realistic (and educated) reserves and let auction bidders decide.”