When will the cost of living and inflation feed through to house prices or will it ever?

Journalist: Samantha Downes, Currently at the I (business editing some Sundays (freelance) and Mortgage Solutions

ended 28. May 2022

We want to look at the impact of inflation and the cost of living increase on house prices.

When will it feed through or are the fundamentals (supply) mean house prices will continue up and and up.

So I'm also interested in hearing about:

The number of older homeowners living in large houses (my father has just said he's downsizing because he's too old to be living in a 4 bed house and he thinks the property market is being skewed - I have to say from my own experience we live near our daughters' schools and there are lots of older people here who have lived here since their children were at school. There's not much sign of downsizing. Is this a trend/something that needs to be addressed.

Or is it because more people are single?




3 responses from the Newspage community

"We have a chronic shortage of homes in the UK generally, and have done for many years, which props up house prices by ensuring demand is always high. This is something house builders are very aware of and why they are very measured in the volumes of houses built. We may see property price growth slow, maybe even dramatically slow, as the cost-of-living crisis bites later in the year, but that alone is unlikely to mean a fall in property prices. Looking back, we only really see property prices fall when mortgage lending availability contracts sharply. For example, in the credit crunch of 2008-09 we saw deals for anyone with less than a 25% deposit pretty much disappear, to the point that Government had to step in with Help-To-Buy schemes in their various guises to help revitalise the market. The issue around down-sizing is a very difficult one, as from a dispassionate view point then yes, it makes little sense for an elderly couple to be living in a 4-bed house with three unused bedrooms. However, as the saying goes "you buy a house, you sell a home". We have to remember that what we see as a property is their life, their memories and that's a very difficult thing to give up for many people."
"We've not seen the real impact of inflation yet. That's hurtling down the tracks towards us and is set to arrive late November-ish. As for house prices, it's anyone's guess. Interest rates will likely continue to rise; however, the chronic shortage of stock means that unless there's a repeat of 2008, prices won't come down by any meaningful measure. Not so long ago, and to make it more attractive, I called for a stamp-duty tax exemption for anyone of state retirement age wishing to downsize. Hopefully, this would incentivise older people rattling around in large family homes to move into something smaller and more manageable, cut their heating and electricity bills, and free up much-needed stock for young families. However, the problem with this is we don't have enough bungalows; developers don't build many because they're not as profitable as three and four-bed semis or detached homes. Until we solve that problem, we're stumped."
The core housing market drivers of a lack of supply and strong demand currently have a grip on prices like Eddie Hall on a deadlift bar, so it's going to take more than a bit of inflation and higher living costs to put the dampeners on property prices. Inflation and living costs would need to reach significantly higher levels to hit property prices where it hurts. All that is happening in the current climate is the weakest buyers are being taken out of the equation, but there are plenty of stronger buyers ready to fire out of the blocks and take their place.