How will the Cost of Living Crisis Affect The UK Property Market

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The property market has performed remarkably well but now that we are facing a cost of living crisis what difference will that make to the UK Property Market? With many different costs threatening to rise all at once causing a cost of living squeeze for millions of people you would expect thi to have a direct affect on the heated temperature of the property market but some doubt that it will. The poorest will be hit the hardest but those who are already well off enough to consider moving up the property ladder may remain largely unaffected. The current strength in the property market is due to the vast difference in the amount of buyers compared to a far smaller number of sellers, the question should be will the cost of living crisis lessen the amount of buyers to the extent that it will correct this imbalance enough to stop prices from rising.


It is interesting to weigh up the severity of the cost of living crisis that the Uk is facing by looking at what costs are set to increase: 

What Costs are Going To Increase

Cost of Mortgages

With The Bank of England raising the base rate to 0.75% the increase will cause those with a variable mortgage an automatic increase in their monthly costs. It is predicted that the base rate could rise to 1.5% by the end of 2022, and if the government does that it will add a further £129 to the average monthly mortgage cost


The increase in the base interest rate will also affect the amount of mortgage lending those who wish to buy a house will be able to borrow. The monthly mortgage payments will be higher than previously and new buyers will be offered a lower amount that they can borrow compared to last year, which may directly result in house prices falling but only if there becomes far less buyers due to this added expense.

Increased Energy Costs

Energy prices for gas, electricity and fuel costs have all increased in recent times. As of April 1st the OFGEM Price cap was raised by 50% and that directly relates to household energy costs hiking a massive 50%. This will force many homes into fuel poverty and people will have to choose between their energy bills and other bills such as also meeting monthly mortgage payments. The UK was already facing an energy price hike due to trading activities last year but the war in Ukraine has caused a further price hike, The UK only relies on 4 5% of our Gas Supply from Russia but in the rest of Europe it’s around 40%. If Putin cuts off gas supplies it will cause a supply squeeze and the cost of gas will dramatically increase on the worldwide market, increasing the cost other gas we have to purchase in the UK.


Increased Prices Due to Inflation
The Consumer Price Index has shown that inflation has increased the highest amount in the past 12 months since records began back in 1997. The 5.5% CPI increase of the cost of goods and services is based on what happened during 2021 and the start 2022 has already been proven to be even worse.          

Other Costs


As well as house prices increasing around 10% in the past year the cost of renting has also increased around 10% due to there being a shortage of available homes for rent. A  further expense for renters on the horizon is that council tax is set to increase by around 5% in many local authorities.
Landlords are now experiencing far better yields than previously, but they may feel the pinch of Interest rates increasing if they are on a variable mortgage or when the fixed term mortgage product ends. If you are a landlord looking to sell your property or you have a number of properties that you wish to sell, visit our landlords section

Whats Happening Overseas?

In America the rate of house price growth has started to slow and more sellers are coming to the market, possibly in a scramble to sell their house fast before house prices fall further.

Affordability to Incomes around the World


The Top 3 least affordable properties when compared to average income in that country have the following ratios:          

1) Ghana   87.65

2) Syria   70.65

3) Hong Kong   46.93


The UK is the 83rd affordable country


As can be seen in the table below the UK is the 83rd affordable country with a income to house price ratio of 8.86. Other countries with similar economies such as Germany, Spain, Italy are in a similar position to UK citizens when it comes to how affordable property is to buy.


82) Germany 8.93

83)  United Kingdom 8.86

84) Spain 8.78

85) Mexico 8.69

86) Italy 8.61


In the United States property is twice as affordable when compared to the Uk:
110) United States 3.96


However, In the United States interest rates have risen by a third from 2.82% to 3.84% in the past year and this may make property less affordable in 2022 due to higher mortgage costs.

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