From landlords and tenants to home and business owners, people all over the UK are already being significantly impacted by the cost-of-living crisis with serious concerns about what is to come and how it will affect them.
We spoke to the experienced property experts at Chadwell Heath estate agents who gave us some insight into how the cost-of-living crisis might affect the property market in the coming months.
Previous market performance
The property market has been performing well over the past 2 years or so, rebounding after the initial hit of the pandemic and increasing by almost 20% since the start of 2020. This was boosted by things such as;
- The big shift in working patterns and need for office space or additional rooms to facilitate working from home
- Low mortgage interest rates
- Government incentives like the Stamp Duty holiday and the mortgage guarantee scheme
- Competition for affordable housing in high demand
- There has been a significant imbalance between supply and demand meaning that those on the market are selling quickly and sellers are able to hold out for the asking price or price higher than usual.
The current market
As of August 2022, house prices continued to rise for the 13th consecutive, month but there are tentative signs that it is losing momentum with the pace of growth slowing, fewer new buyer inquiries and the number of mortgages approvals falling to below pre-pandemic numbers. Currently mortgage payments are most affordable for those with large deposits which is bad news for first time buyers. The expected 10% deposit which is needed to secure a mortgage is now more than 50% of a typical buyer’s annual income, which combined with the cost-of-living crisis makes saving even more difficult.
The future market
Although many experts have stated that it is very unlikely house prices will crash, most predict that they may fall slightly towards the end of 2022 and moving into 2023 as a result of affordability constraints. Some of the things that might impact the housing market and the price of properties are;
- Rising Inflation – this is making goods and services more expensive and affects – how much people can save, how much money they have leftover at the end of every month and small businesses who are hit particularly hard.
- The Pandemic – unfortunately as much as we’d like to think it is all over and behind us, with every winter and newly discovered strains and variants come the threat of further restrictions.
- Interest Rates – In December 2021 the BOE interest rates were at record lows of 0.1% before they were increased. As of September 2002, they currently sit at 1.75% which makes mortgages more expensive. It has been said that this could rise to as much as 3-4% to combat soaring inflation.
- Rising Costs – The high cost of fuel and rising energy bills is making it more difficult for people to afford their mortgages and could result in many needing to downsize or sell up.
Taking all this into account and everything that has happened to the housing market over the past years, homeowners can expect to see a slow in demand and annual price growth falling to single digits, with mortgages becoming more expensive and harder to obtain.
