How Will the Cost of Living Crisis Affect the Property Market?

22 April 2022

It’s clear, in 2022, we are witnessing the cost of living beginning to spiral. Rising interest rates, the increasing costs of food and fuel, plus the increases in council tax bills, and national insurance contributions, all mean that many of us will be feeling the pinch in the coming months.

If you are looking to buy, sell, rent or let a property, you may be thinking about how a tighter budget could impact your property prospects. You may be asking questions such as, is now a good time to buy? Or a good time to sell? How will rising interest rates affect your mortgage and how could increasing costs impact your affordability? 

How will higher costs impact first-time buyers?

First-time buyers may be disheartened by recent headlines, and unsure how the current climate will affect affordability. However, don’t be put off if homeownership is something you are working towards – there are ways and means to make sure you can still make it happen.

Jordan MacKay, Branch manager at Aberdein Considine, explains: “Consider your affordability, and look at what you can get for your budget in different areas that you might not have considered before. Mortgage payments, council tax and utility bills can be less outside of the city centre, and you may be surprised at how much more you can get for your money with an added commute. An independent mortgage adviser will be invaluable in helping you to find the best deal and rates to suit your financial situation, so be sure to speak to one about your concerns.”

Paul Demarco, ESPC Mortgages, advises first-time buyers to consider new-build homes to help with affordability: “The issue for many first-time buyers is a lack of housing stock driving up competition. Buyers are having to pay well over the property value, which means that in many cases, they don’t have enough of a deposit. First-time buyers can try searching for properties listed at a fixed price, and careful consideration of location, budgets and property types, such as new builds, are all important. If you’re seeking financial support, currently the only scheme available in Scotland is LIFT, which is worth looking into if you think you may meet the criteria.”

How will existing homeowners be impacted by rising costs of living?

If you are considering selling your home this year, you may be wondering how the timings could affect the prospects of your potential buyers. However, experts do believe now is a good time to sell your home, enabling you to make the most of the competitive market.

Jordan MacKay explains, “The market has been very strong so far in 2022, and we have seen some excellent prices being agreed. With that in mind, now may be the time to take advantage of such a buoyant market, as you could make much more than what you think your home is worth, making that next step easier.”

If you are a homeowner planning to stay in your current property, you can benefit from the current low interest rates. Paul Demarco states: “Mortgage fixed rates are already being repriced, and the rates are higher as lenders increase both the standard variable rate and their fixed rates. The Bank of England predicts that interest rates will rise again, with a base rate possibly as high as 0.75% by the summer. Anyone within three months of the end of their fixed rate mortgage should contact a mortgage adviser as soon as possible – we can help to secure a new rate that will be lower than say, three-six months from now, and can ideally fix it to mitigate against any future rises.”

Jordan concurs: “Whether you’re selling or not, speak to a financial adviser about your concerns. They’ll be able to look at your current mortgage and pension payments and protection policies, to ensure these work for you but also to see if cheaper alternatives are available.”

Will the cost of living crisis affect buy-to-let property?

Nicky Lloyd, head of ESPC Lettings, says that now presents an ideal time for landlords to expand their property portfolio, or for those considering the world of property investment to take the leap. Tenant demand is rising and stock levels remain low, so the time is perfect for purchasing and developing a high-standard rental property.

“Tenants are renting for longer periods than we’ve ever seen before, so adding to your portfolio now could present a good long-term investment,” explains Nicky. “Be mindful of your budget when purchasing, and stick to it. The highest demand is for properties in good locations with a high standard of finish, so factor that into your costs.”