Will the cost of living crisis affect house prices in Cheadle?

There is a wealth of uncertainty at the moment, and one of the major worries for households up and down the country is the impact of the cost of living crisis. Everyday essentials have risen astronomically, everything from fuel to food and energy, and therefore you may have heard a variety of different opinions on what, as a result, will happen to the property market.  But before you assume that the outlook for the value of your home is going to be gloomy, we try to take an objective look at the property market in Cheadle – and ask: will the cost of living crisis affect house prices?

Where are we now?

According to the Halifax, in April the average price of UK property was up 10.8% on the same month last year, and the average cost reached a record high of £286,079, which is a result of the longest run of increases since 2016. Only the other day, the Nationwide, who have an even brighter outlook than the Halifax, said prices in May had risen 11.2%, but that the rate of increase was now starting to slow. The recent property boom was fuelled by the Covid pandemic, and the first lockdown, so the housing market has defied economic conditions. It isn’t just Covid that has been driving house price growth but also low interest rates, the stamp duty holiday, and the desire to relocate and search for bigger homes with more space.

“Housing transactions and mortgage approvals remain above pre-pandemic levels, and the continued growth in new buyer inquiries suggests activity will remain heightened in the short-term. The imbalance between supply and demand persists, with an insufficient number of new properties coming on to the market to meet the needs of prospective buyers and strong competition to secure properties driving up prices,” said Russell Galley, the managing director of Halifax. A similar message was put out from Robert Gardner, the Nationwide’s chief economist.  Therefore, lenders remain cautiously optimistic which is encouraging.

It isn’t just the cost of living that is squeezing household budgets though, but also mortgage rates. The gap between house prices and earnings continues to widen, reports the Office of National Statistics (ONS). With the average cost of a home in England rising from 2020 that saw 7.9 times earnings to an average of 9.1 times earnings. As a result, home buyers are struggling to find larger deposits, thus forcing many into staying in long-term rentals. Nationwide reports that seven in 10 have now put their plans on hold for at least two years.

We haven’t seen too much evidence of this in Cheadle just yet, but clearly if things continue on the current trajectory, you might wonder if things are sustainable.  However, in our latest Cheadle Property Market Update, released yesterday we did note that for the first time in many months that the number of daily property views by buyers on Rightmove was down almost 20% and this is something that we will need to keep an eye on over the next month or two, to see if it was just a blip or becoming a trend. 

Where are we headed?

The general feeling is there is a slight shift and things have started to slow, which is confirmed by the Halifax’s monthly property index which states the rate of growth in April is down from March. “Even though there is a lot of caution about the future economic landscape, it seems that limited supply available on the market, coupled with steady demand growth, are still the overriding drivers of house prices,” suggests the latest RICS Residential Market Survey. 

Despite this increasing financial tightening, industry experts still believe that we are not headed for a crash.  At Maurice Kilbride, and we can only really talk about the SK8 and SK3 market, we are not expecting house prices to fall dramatically, but we do think that the rate of growth will start to stagnate and maybe show a modest correction.  Savill’s, one of the UK’s largest estate agents, have just downgraded their five-year forecast and are now saying we will see a 1% drop in house prices in 2023 and modest growth again in 2024 and 2025. Russell Galley, the managing director of Halifax states: “The headwinds facing the wider economy cannot be ignored. With interest rates on the rise and inflation further squeezing household budgets, it remains likely that the rate of house price growth will slow by the end of this year.”

There is no doubt that your finances are under pressure this year, and one thing that we know from the last couple of years is it’s hard to predict what might happen next! Rightmove’s Tim Bannister commented: “With so many variables affecting house prices and affordability, it’s a reminder that the market is extremely difficult to predict, and those looking to buy will be prioritising their own needs and what they can afford rather than waiting to try and time the market.”

We understand that you may have specific questions related to the value or sale of your home and own personal circumstances. Joe, Patrick and Maurice are always available to discuss your concerns on 0161 428 3663, e-mail sales@mkiea.co.uk or why not pop into the office on Cheadle High Street for an informal chat. Alternatively, you can book a FREE market appraisal of your property online by following the link Book a FREE valuation