It is hard to avoid hearing about the cost of living crisis in the news right now as everything from food and energy to fuel and housing seems to be on the rise. Another common news topic is the rising demand and cost of property. So what happens when the two collide? Will the impending recession and rise in the cost of living decrease demand for property? Is now a good time to be buying or selling your home? Keep reading as we delve into the impact of the current economic situation on the property industry.
Rising house prices
It probably comes as no surprise to hear that house prices have been steadily rising since the global pandemic began in 2020. Many people who previously could not save enough money for a deposit or a mortgage had more disposable income from not being able to go out and so we saw a big increase in buyer demand. House prices since then have steadily crept up month upon month and this competitive market saw house sellers being able to demand much more for their homes. With the cost of living crisis, you may think that these prices will start to drop but for the time being it seems far from it. Due to all aspects of life being more expensive, homeowners will be pickier about the price that they let their home go for and therefore we are still seeing an inflated market. Both home and rental prices continue to rise, with increases of as much as nearly 12% in the last year. Now could be a good time to look to sell if you are thinking about downsizing and would like a bit of profit to help you with furnishing your new purchase.
Increased demand for property
Although living costs are rising, the demand for property continues to rise with it, in fact the two go hand in hand. Due to the fact that there is a shortage in both rental properties and properties to buy, competition is stiff and so it seems that demand is only likely to be on the up. with more first time buyers having saved up and looking to step onto the market, there is a growing demand for starter homes. These sort of small flats and houses which consist of just one or two bedrooms are in high demand and sadly there is simply not enough of these types of properties to go around. Buyers have to be constantly keeping an eye out for new properties going on to the market and be ready to view anything and everything in order to secure a deal. They will however have the advantage of not being in a property chain. Again, this could be a great time to sell up if you are perhaps looking to move from the city to the suburbs and want to get a quick deal. Properties in Scotland are selling in as fast as three weeks at the moment so get in touch with an estate agent and a mortgage advisor if you think it is time to move on.
What this means for mortgages
The mortgage market is seeing a lot of changes at the moment given the current financial situation. With inflation rising we have seen the Bank of England for example make multiple increases to interest rates which could make affording a mortgage more difficult for first time buyers in particular. Those who are on a variable rate mortgage or approaching the end of a fixed rate will also be affected and should discuss their options with a mortgage advisor. Perhaps due to rising interest rates and the cost of living, it is likely that we will see a boom in remortgaging rather than moving homes outright. This could allow customers to get a better mortgage rate or release some money for home improvements rather than going through the upheaval of a whole new home and mortgage deal. If you would like more mortgage advice in this time of economic uncertainty, don’t hesitate to get in touch with the team.