House prices have ‘hit peak’ – Britons won’t move among ‘nightmare’ cost of living crisis

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But if the pandemic has taught us anything it is that tradition has been turned on its head. So this month is unlikely to be anything like as busy as we’d normally expect for this time of year.

We must however keep things in context. For months now the market has been booming with prices sky-rocketing in all parts of the UK.

Indeed, the Office of National Statistics’ latest projection shows prices up 10.8 percent in 2021 with London lagging at 5.5 percent. And Nationwide’s HPI shows a seasonally adjusted increase of 0.8 percent in January and 1.7 percent in February.

If that increase continued throughout the year we’d see double digit inflation adding nearly £40,000 to the average home.

But here’s the snag: I really don’t think it will be happening. Yes the market has defied the odds before and risen out of the challenges of Brexit and Covid.

But the mass return to work, the rush to buy at low fixed rates and the usual post-Christmas bounce all fuelled the market to reach never before seen highs in the past three months.

I believe the market has therefore probably hit its peak and it won’t rise to that level in March.

The biggest issue is the cost of living crisis. And this crisis is only set to get more acute in April when fuel bills will increase for many by 40 percent and more.

This will have a particularly big impact on the housing market. The knock on effect will be increased costs in everything we buy, not just what we use to light and heat our homes.

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The prices of other household items and bills will rise and rise and rise this year as well. This will see buyers increasingly begin to factor in the increased cost and try to adjust their budgets accordingly.

Think about that moment you sit down with your mortgage advisor and try to calculate your outgoings. It’s hard enough at the best of times, but in the middle of a cost of living crisis? It is a nightmare. And, as a result, many will choose not to move.

There is already evidence that lenders have begun to look more closely at a borrower’s current and projected spending and we may begin to see multiples (that’s how many times your income they’ll lend) reduce.

I’ve also noticed landlords beginning to exit the market, keen to bank profits and beat looming environmental legislation. The cost of living crisis will therefore likely hit tenants the hardest with increased rent arrears and defaults expected further down the road.

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The tragedy unfolding in Ukraine can also not be overlooked and it will only amplify the problems here, potentially starving the country of much needed funds for rebuilding post-Covid and for essentials such as aid and defence.

One of the biggest issues facing the market right now is the continued shortage of homes. Some sellers, especially landlords, are holding property waiting for prices to increase.

Right now many owners are simply sitting and waiting meaning there is a huge lack of supply in the market. That’s the really big issue.

Where people are selling they are increasingly looking to rent while they find their dream home. And that is driving rental prices to fresh highs as well.

The people I really feel sorry for right now are first time buyers. It’s always been hard for those trying to get a foot on the ladder. But right now must be among the toughest environments ever for those looking to enter the market, perhaps the hardest period we’ve seen in a generation.

A single person with a salaried job will really only be able to borrow four times their gross annual wage. Some lenders may offer more but borrowers should think carefully before potentially over-borrowing. The average property value is £270,000 – more in London. Yet the average wage is £39,000. Four times that is just £156,000. Cheaper homes are of course available but even so, the average buyer will therefore require a substantial deposit and/or a very well paid job.

The solution, other than relying on the Bank of mum and dad, is to look at buying in cheaper locations and flat sharing whilst you save. My advice would be try to invest your savings as well as you can for the maximum return and take a Help2Buy ISA for free government money. Or aim to buy with a trusted partner and consider shared ownership.

If all else fails, invent a time-machine and head back to March 2009 when prices were less than half their current level.

Jonathan Rolande is the Director of House Buy Fast.

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