The force of winds affect and predict climatic conditions. Similarly, the “changing winds” of economic and other factors forecast that there may be a switch in the property market. Since the pandemic, house sales have risen, with consequent price increases as well, making it more of a seller’s market. However, with the current economy and energy crises, certain aspects are changing and it now seems to be swaying in favour of buyers.
Agents in the real estate market, including the estate agents in Summertown, have been kept busy for the last few years with the rising demand for houses. The pandemic started a major exodus from cities to suburbs and rural areas, which resulted in a peak in prices. Now, with inflation and the consequent rise in cost of living, there may be a slowdown in the sale of houses which may lead to price reductions which, in turn, could benefit buyers. We look at a few reasons why this is so.
Property available:
The ever present excess demand over supply had caused the surge in property purchases and prices as well. While the demand is still high, the purchasing power of buyers has been hindered by inflation. This has made some properties unaffordable and has reduced property transactions. The result of this has caused quite a few sellers to reduce property prices, to enable sale. This has benefitted prospective buyers.
First time Buyers:
The stamp duty relief for first time buyers is an incentive to fulfill their dreams of buying their own homes. However, with rising interest and living costs, many such buyers are finding it difficult to cover the high mortgages. However, determination persists and they are consciously cutting down on entertainment and other expenses, to save for larger deposits and to ensure that their mortgage commitments will be met.
Rising Interest Rates:
The recent increase in UK interest rates has caused mortgage rates to also rise, making it more difficult to afford higher mortgages. This in turn has led to less transactions taking place. When the price is beyond the average budget, sellers are sometimes forced to reduce prices which can be beneficial for buyers. Also, some owners who are keen on selling their properties before the year end are willing to reduce prices near Christmas time to attract buyers. On the other hand, some buyers who already have a mortgage offer are rushing to complete transactions so that they can avail of the fixed rate of interest.
Following the turmoil of the mini budget in September, and with the new government, an expert from Nationwide in a Forbes report said, “Longer term borrowing costs have fallen back in recent weeks and may moderate further if investor sentiment continues to recover.”
Price sensitivity:
After a long term of price hikes and increasing property prices, the influencing factors of the economy, inflation, rising energy and interest rates are leading to sensitivity over prices. Sellers are realising that unless reductions are made in prices, sales are going to take longer to happen or may not even transact. This factor proves beneficial for prospective buyers.
Vicious circle:
The demand for housing has dropped for the first time since the surge after the pandemic. According to the RICS (Royal Institution of Chartered Surveyors), records show that house prices have also fallen, the first negative reading since mid-2020. When house prices fall, the incentive to buy increases and therefore, the demand, leading to more interested prospective buyers!
Conclusion:
There is still so much uncertainty of factors that affect the Housing Market. Rising rates, economic issues including employment as well as environmental shocks are major contributors At this time, it is difficult to say how the winds will blow. It appears that prospective buyers may have an opportunity to take over from sellers who have been on the pinnacle for some years now. However, to counteract the high mortgages, people are looking at smaller, less expensive properties which will be affordable and still provide a roof over their heads. Research has shown that, despite high costs and the difficulties involved, the demand for property is still there. And, as long as the demand exists, the property market will continue to survive, whether it be a buyers’ or sellers’ market.
