Inflation Takes its Toll – But Housing Market ‘Rebalancing’

The stock of homes is beginning to increase, showing clear signs that the frenzied housing market is beginning to slow.

The housing market hit a fever pitch while we enjoyed the stamp duty holiday during  the pandemic, but the current cost-of-living crisis and rising mortgage rates are starting to impact the housing market.

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Nationwide released its most recent data last week, which found that prices are up 11.2% on average year-on-year. But there are clear signs the property market is slowing down, the lender said.

Robert Gardner, Chief Economist at Nationwide, expects the housing market to slow as the year progresses:

Household finances are likely to remain under pressure with inflation set to reach double digits in the coming quarters if global energy prices remain high.

Signs of a shift

Gardner added that consumer confidence has already hit record lows and, as the Bank of England is widely expected to raise interest rates again, this will ‘exert a cooling impact on the market if this feeds through to mortgage rates.

There are ‘subtle signs of a shift’ in the housing market according to OnTheMarket CEO Jason Tebb. He said the market is rebalancing through rising numbers of new instructions, although it will take time before this becomes more prevalent:

The ‘new normal’, an elevated version of the pre-pandemic market continues. It’s a complex market with regional differences continuing to play a part and one size doesn’t fit all. Those buyers who need to move remain determined to get on with it.

CEO of The Guild of Property Professionals, Iain McKenzie, agreed, adding that, ‘There’s yet another month of growth for the high-flying housing market, but we’re increasingly seeing signs that it is starting to feel the inexorable pull of gravity.’

How will landlords be affected?

While the cost-of-living crisis hasn’t had a severe impact on house prices, we are likely to see the rate of increase slow over the next few months, as challenges in the broader economy filter down to the housing market.

As households begin to struggle with the cost-of-living, attention will turn away from climbing the housing ladder and towards making ends meet. Supply is gradually building up to match demand, so there is less and less competition driving up the prices.

For landlords, this means:

  • Potential rental struggles. As households struggle with bills and rent, landlords could be facing more arrears, at a time when many are still recovering from arrears built up during the pandemic. Be sure to invest in Rent Guarantee Insurance now to protect your investment
  • Better buy-to-let opportunities. With the buying frenzy of the last few years, buying was a stressful thing to be doing! As the housing market slows down and more properties become available, if you had been thinking about buying your next buy-to-let, now is the time to start looking!
  • Paying attention. Belts are tightening across the country and landlords are no exception. So now is the time to pay extra attention to your income and expenses with our free Expense Tracker.
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