Many first-time buyers and homeowners are becoming more cautious of the property market. The cost of living crisis, combined with rising interest rates and changes to the rental sector, mean that the future of the market is more uncertain than ever.
In this piece, Paul Beresford, chief executive officer of Essex Property Group Beresfords, shares his views on the market and what he’s seeing as a result of inflation.
Demand remains strong
House prices have been record-breaking over the past year and although we’re seeing inflation across the UK, this hasn’t resulted in the property market being brought to a halt.
There continues to be an underestimated resilience in the market, as we see the demand for viewings remain high.
In Q2 a total of 66,150 new homes were built, which is an 8.6% increase compared to the same period last year. The local rental market also remains buoyant, with the East of England showing a 4% annual increase in average rent prices.
Rates creep back up
Inflation hit 9.4% in June this year, and interest rates within the property market are expected to rise – which is where we could see the market slowing down by the end of the year and into 2023.
With the Bank of England raising its rates in August from 1.25% to 1.75%, we can expect to see higher mortgage rates - which reached an average of 2.29% and 2.59% for two-year and five-year fixed rates in 2021, respectively.
Average house prices in the UK
The average price of a property in the UK is £283,496, which is 12.8% higher than last year and equivalent to an increase of more than £32,000.
While many forecast the market to crash house prices remain high, and we expect it to stay that way in the short term with the market sustaining itself. Our properties are selling for their asking prices, however more buyers are offering under the asking price as opposed to over during the property house boom.
Despite this period of inflation, house prices fell by 1.3% in July and August which is the lowest rate since December 2019, according to RightMove. If you’re looking or have been thinking about selling your house, now is the time to find out what position you’re in by getting your property valued.
For those looking to purchase their first home, ensure you have your Mortgage in Principle ready and calculate your Help to Buy amount. That way you can work out how much you can afford and entitled to borrow, and most importantly your deposit.
People will always want, and in some cases need, to move. Naturally, we will see changes in the market, but in the short term this will likely be down to buyers becoming more price sensitive as the year progresses and mortgage rates rise.
*Paul Beresford is chief executive officer of Essex Property Group Beresford