Author : Ian Barbar
The supply shortage of buying and renting is pushing the cost of renting property skyward. When demand outstrips supply, process rise, simple economics (unless as is happening in the 'for sale market' demand is on ice whilst would-be buyers wait and watch). However, the knock-on impact of this is that more people than would otherwise be the case want to rent. In recent decades, rising property prices have made it harder for first-timers to buy a home in the UK. In addition, it just got worse. At a time when some price adjustment is expected due, t to the recessionary climate, homebuyers ordinarily (if their disposable income remained constant) be thinking about buying. However, a recent survey from Aviva reveals that over a million people have changed their minds and opted out of the first-time buyer market due to pressures caused by the cost-of-living crisis. Interest rate uncertainty and high fuel and living costs are hitting hard.
The increase in mortgage costs after the disastrous mini-budget forced many first-time buyers to put their decision to buy a home on hold. Surveys show a widespread decline in the purchases of new property across the UK.
Figures from the Aviva survey show that buyer demand crashed by nearly 20 percent in October 2022 compared to October 2021. Therefore, it is evident that UK house hunters are putting their buying decisions on hold as borrowing costs soar and the country’s economic uncertainty continues. Government data reveals that long-term empty home units have increased in every region of the UK during 2022. Across the UK, there was an eight percent increase in empty homes. The figure reached 257,331, up by around 20,000 units; which is the highest increase since 2011. These figures exclude the legitimate empty homes' resulting from the death of homeowners. There are about 120,000 further homes in this category.
Liz Truss’s mini-budget ended up adding hundreds of pounds to mortgage payments. The result is that the country’s monthly house price index showed that first-time buyers were the most hesitant. The demand for new homes was down 26 percent in October 2022. Demand from those looking to move from their first home was down 17 percent.
Property experts expect the cost of renting in the UK to increase further in the coming months.
It will likely deepen the cost-of-living crisis and increase the pain for those looking to buy their first property. Rents are expected to keep increasing with the rising demand for homes from tenants, and a continued shortage of supply as the availability of new properties dries up. The higher renting cost makes budget management a huge challenge for many tenants. It is making things harder for younger people to buy properties as prices boom in the post-pandemic property market. The surge is worsening affordability for consumers already coping with the highest inflation in four decades.
Some are going ahead with the move to buy their first home, mostly those who have already agreed on a purchase, with mortgage and valuation and the sale process already advanced. However, many have pressed the pause button. A severe slowdown in market activity has resulted in sellers reducing their asking prices in an attempt to achieve quicker sales. Some young buyers are ready to move but await more financial certainty before making a final call. The worst affected groups are the first-time buyers or people hoping to trade up. They have already stretched themselves financially and are seeing their plans evaporate as the cost-of-living crisis worsens and reduces the available cash they have in their pockets.
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