The rising cost of living and higher mortgage rates are forcing potential homebuyers to put their property plans on hold, research suggests.
A survey by personal finance website NerdWallet found one-fifth of Brits planned on buying a property last year, yet 42% of those were unsuccessful in doing so.
Concerns about the cost of living crisis were the biggest factor at play, with 36% citing this among the reasons that they did not buy a property in 2022, while one in three cited being unable to find a property.
Another third said they had decided to wait because they were concerned about the economic uncertainty.
A year later, one in five said they now feel worse about their ability to buy a home in 2023 compared to 2022.
One in three said they won’t buy this year due to the cost of living crisis, and more than a quarter (28%) because of high mortgage rates.
As a result of the pessimistic outlook, only 2% of those thinking about purchasing a property in the future, whether as a first-time buyer or a home mover, would like to do so within the next year.
Almost one-third of people have a target of buying within the next five years, which is when most people think it’ll be achievable. Slightly more confidently, 17% say they would like to buy within two years, but this rises to 38% amongst the 18- to 24 age group.
For others, there is an intention to buy but they are either looking to the long-term – 11% are hoping to purchase within the next 10 years – or they don’t have a clear date in mind of when this might be, according to the research.
Tim Leonard, personal finance expert at NerdWallet UK, said, “Buying a property over the past 18 months has become increasingly more challenging, with rising inflation and interest rates making it more difficult for people to save for a deposit and fees, and pass lenders’ mortgage affordability tests.
“First-time buyers are likely to be struggling more than ever to achieve their homeownership dreams, while there are considerable challenges facing existing homeowners who are hoping to move too, potentially leaving people stuck in homes that may not be right for them, or they can barely afford.”
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As I have written on EAT before, there is a great demand for housing, but it is effective demand that is deficient at present, i.e. the ability and willingness to buy. Ability to buy is restricted by the current level of average property prices in relation to average incomes, rising mortgage rates and cost of living issues in general. Willingness to buy is influenced to a considerable extent by confidence, a largely psychological factor which is closely linked to expectations about the direction of prices - and given the downward trend now evident, it is not surprising that people who do not have to move (because of job relocation, divorce, etc.) are waiting for further reductions. Given this lack effective demand, the fortunes of the property market are less than rosy for the foreseeable future.
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