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Home-Hunting in the Time of Inflation: What Does the Future Hold for House Buying?

Real estate broker agent presenting a house model with keys to the buyers

Inflations levels hit 9% in April, registering the fastest rise in consumer prices in the last four decades. As a result, our bills and receipts have been soaring. The cost of food and drink could rise by 15% this summer and filling the average family car with petrol now exceeds £100. So, it is fair to say that inflation is affecting many areas. In this respect, the housing market has not been spared either.

With all that has happened in the last couple of years, we all recognise the importance of having a home that offers you the comfort and safety you require. But as life presents more and more financial hurdles, many home-hunters may feel discouraged when searching for their perfect new property.

How is inflation impacting the price tags of houses for sale? Are properties becoming more expensive or affordable? Here, with some insights from Watermans, a legal and estate agency firm, we take a look at how the existing crisis will influence the future of house buying.

Inflation and house prices: costly or cost-effective?

Let’s not beat around the bush: as things stand, property prices in the UK are not likely to be very advantageous. The average asking price in June across Britain stands at £368,614, increasing for the fifth month in a row. But looking back at the figures of the past few months, it is perhaps no surprise that houses’ initial price tags have shot up even more.

In March, in fact, the average cost of a British house reached a record high of £282,753. Not only was this 1.4% higher than the average rate of home prices in February, but it represented an 11% increase compared to March 2021. What this means is that, in the space of a single year, the average property cost has grown by £28,113. When taking into account the fact that the average UK salary now stands at £28,860, you could argue that this costly price rise may be having a significant impact on potential homebuyers’ pockets.

Currently, England is the country with the highest house prices in Britain. As of April 2022, you can expect to pay £299,000 to move into a new property. If you live in Scotland or plan to relocate north of the English border, you might be able to save some money. Yes, house costs have increased in Scottish towns and cities too, but you would be likely to secure a new home for about £188,000 on average.

Inflation is not the only factor to blame for such a considerable growth in property prices. In fact, the sustained increase has been determined by two correlated aspects. On one side, the market has witnessed a shortage of houses for sale; on the other, with the ‘race for space’ incentivised by the pandemic, the demand for new spacious properties has sky-rocketed. As a consequence, home-seekers are being forced to close costlier deals.

Moreover, the rental market has been impacted by the rising inflation as well. With the exception of big English metropolises such as London and Birmingham, the majority of British cities have seen rents increase significantly. For instance, rent rates in Belfast, Bristol, Manchester, and Edinburgh have soared by 15.1%, 12.6%, 8.6%, and 3.9% respectively over the past two years.

The cost of living crisis is bound to stay for the foreseeable future. But, in the months to come, will the rising inflation end up aiding people on the hunt for a new property?

Inflation: the long-term effects on the housing market

Britain’s current economic climate and financial situation has brought the cost of houses to an all-time high record. But, as mentioned, the housing market is not the only sector to have witnessed a swift rise in prices. For some time, the increasing cost of living will continue to negatively affect people’s bank accounts.

In the long term, however, this could benefit those looking to purchase a new property. Goods and services are becoming more expensive, which suggests that fewer people will have the budget to afford a significant, life-changing investment (e.g., buying a house).

Hence, demand is likely to decrease in the upcoming months. Not only that, but in 2022 Rightmove has also registered a 19% jump in the number of home-sellers requesting a house valuation, meaning that more properties will be available on the market. All these factors are bound to push down the cost of houses.

Additionally, there is a chance that the price tags of properties in the UK will naturally ‘correct’ themselves. In the same way that costs have gone up considerably, house prices could begin to fall to restore a more affordable value. Therefore, if you have set aside some money to make the move you have been dreaming of, the next few months may offer you the opportunity to relocate to a home that suits you and your needs.

The rising inflation is having a substantial impact on many areas of our everyday lives. If you are planning to buy a new property, prices at the minute could seem somewhat prohibitive. That said, with reduced demand and more homes on the market, the future of house buying may be more optimistic for those hoping to inaugurate a new chapter of their life.

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