Housing market expected to reach new level high despite cost of living rises
According to a new report released by the Reallymoving House Price Forecast, house prices are set to rise again in May despite a forecasted drop in March and April. The rise of 6.7% in May will follow a drop of 0.9% in March and 0.2% in April. A slowing down of growth at the start of 2022 will result in lower house prices in March and April but the strength of demand continues to grow at such a pace that prices will inevitably move upwards again after this time. The rising cost of living appears to have had little effect yet on buying decisions but is expected to impact more towards the third quarter of 2022. The rise will be directly due to buyer competition for a limited supply of homes during February. This is in spite of a second base rate rise within a three-month period which, as yet, has had little effect on demand with many prospective buyers keen to purchase as soon as possible to lock in a fixed rate deal at the lowest price. Conflict in Ukraine and the subsequent impact on the cost of fuel and energy is expected to impact consumer confidence and affordability over the next few months, but at the moment the shortage of houses available on the market has ensured a steady stream of buyers forced to compete for homes.
The rising cost of living will likely impact first time buyers the hardest. The increase in fuel and everyday goods and services is already being felt keenly across the board, but for those trying to save for a deposit finding the extra disposable income may prove impossible. Wages have risen slightly but not in proportion to house prices and with rent prices being at a record high, many would be buyers will feel the squeeze. For those who have managed to save for a deposit a forecasted drop in prices will be great news, however many may still want to purchase as soon as possible to benefit from the lower rate deals ensuring their mortgage repayments are cheaper for longer.
Rob Houghton CEO of Reallymoving says: “Last month we saw some early signs that the market may be beginning to slow but the latest data shows prices rising sharply in May based on activity in February, suggesting that for now the housing market will continue to defy expectations. We’re seeing a clash of post-pandemic driven buyer demand and a cost-of-living crisis which is only now really beginning to bite, and as yet it remains a seller’s market and the supply/demand imbalance is continuing to push up prices. It’s too early to assess the impact on consumer sentiment from the war in Ukraine and if uncertainty grows and prices rises become more painful, I expect we’ll see the tables begin to turn. “First Time Buyers are stuck between a rock and a hard place, watching prices go up along with mortgage rates, while facing the challenge of trying to save while paying record high rents – and a shortage of homes to buy. Many will be tempted to hold out for price falls, but our advice would always be to move when you have all your ducks in a row in terms of raising a deposit, securing a mortgage and finding the right home to buy at a price you can afford. Buying with a long-term view – at least 3 to 5 years – will help you to ride out any short-term fluctuations, rather than trying to call the market.”