House prices prediction: How the cost of living crisis could halt rising house prices

House prices: Expert discusses 'interesting' pricing differences

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After a booming two years for the market, some are expecting the rise in the cost of living to force house price growth to cool off in the coming year – but experts explain there are multiple factors at play if the market is going to slow down anytime soon. The price of the average UK home reached a record high of £276,759 in January. That’s up £24,500 over the year, and £37,500 higher than two years ago.

Wales had the best performance of the year so far, with annual house price inflation of 13.9 percent compared with last January, to an average of £205,253.

Northern Ireland house prices rose by an average of 10.2 percent to £170,982, while Scotland was up 8.9 percent year-on-year to £192,698, slightly lower than prices in December.

In England, the North West came out top of the pile – with prices up 12 percent year-on-year to £213,200.

But despite the rise in prices, growth slowed to just 0.3 percent – the smallest monthly increase since June last year.

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The drastic rise in living costs includes higher energy and food bills, rising phone and broadband charges, and increased national insurance from April onwards.

As the average person’s monthly spend on food, energy and other living expenses increase from rising inflation, experts predict it could start to limit some individual’s affordability calculations – and therefore impact how much the bank allows them to borrow.

Richard Wayman, Finance Director at CIA Landlord Insurance, told that a slow down will come in tandem with the cost of living crisis.

He said: “House prices in the UK have hit record highs in the past year. However, the industry expects this to slow down in the coming months with the cost of living increasing substantially.

“People will want to be more careful about how much they are spending when they have to factor in rising costs of bills.

“This will undoubtedly affect the property market. Budgets will be tighter and people will be less willing to pay over market value on a home with all of this in mind.

“Especially first time buyers who will be particularly cautious not to overstretch themselves.”

But some experts said other larger factors in the market are stopping property prices from falling.

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Britain is currently enduring a housing shortage, thanks to supply chain issues from the pandemic.

This has resulted in a scarcity of houses for sale, so the cost of living crisis is unlikely to be the number one factor bringing growth down.

Toby Fields, co-founder of Bristol-based Langley House Mortgages told “Frighteningly low stock levels are supporting prices in the face of soaring inflation and rising interest rates.

“While the economic fundamentals should be weighing down on it, the property market remains robust and resilient, as it has been throughout the pandemic.

“The only way prices will fall is through a surplus of supply and that’s unlikely any time soon given the lack of new homes being built.”

Andrew Montlake, Managing Director of the UK-wide mortgage broker, Coreco, told “Despite the rising cost of living, average property values are unlikely to fall as mortgage rates are still phenomenally competitive and supply levels are obscenely low.

“People are also keener than ever to leave the rental market, where prices are often painfully high.”

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