A prominent business analyst has given a bleak warning about the prospects for property investors and other home owners in 2023.

Sarah Coles, head of personal finance at consultancy Hargreaves Lansdown, says: “The house price slip has become a slump, with the biggest annual price drop in 14 years [according to the Nationwide]. The pace of descent accelerated, and we’re already almost five per cent below the peak in August. Unfortunately, the indications for the future aren’t looking terribly promising either.

“Buyers have been broken by rampant inflation, jacked-up mortgage rates, a stagnating economy, and the threat that there could be worse to come. 

“RICS figures for February showed that buyer demand fell again – for the tenth consecutive month. Buyer enthusiasm is likely to have been dampened even further by the fact the gradual fall in mortgage rates stalled in March. At the end of February, according to [independent mortgage monitor] Moneyfacts, the average two-year deal was at 5.32 per cent and by March 30 it had risen very slightly to 5.38 per cent.”

Coles says that as a result, sellers – including landlords quitting the sector in high volumes – are having to compromise in order to shift their properties. 

“RICS says that 60 per cent of homes worth up to £500,000 are selling for less than the asking price, and Zoopla found that 40 per cent of home sellers are cutting their prices even before a seller comes along – by an average of 4.5 per cent.”

But she says there is one glimmer of hope on offer from the mortgage market. 

“The bump in rates is likely to be a temporary blip, due to inflation coming in higher than had been expected. As we get further into the year, we’re expecting inflation to fall significantly, so we may well see rates on the way down again. 

“Already February saw a very small pick up in the number of mortgages approved for the coming months. However, it’s still less than half the numbers we were seeing two years earlier, so you need to look very closely to see any real hope in these figures.”

The analyst says it’s easy to read these figures as the start of a slippery slope, where price drops start gradually and then accelerate. 

She says instead it’s possible that there might be more of a gradual drift down “but it’s looking increasingly unlikely.”