How will the cost of living crisis affect the property market?

It’s been well documented that we’ll see living costs spiral in 2022. 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’re hoping to buy, sell, rent or let a property, you may be thinking about how a tighter budget could impact your property prospects. Is now a good time to buy, or indeed a good time to sell? How will rising interest rates affect your mortgage, and how could increasing costs impact your affordability?

We’ve spoken to a panel of experts, from ESPC Mortgages, ESPC Lettings and our member firms, to help you combat these concerns and succeed in the current climate.

How will higher costs impact first-time buyers?

Those hoping to purchase their first property may be disheartened by the headlines, and unsure how this will affect affordability. However, don’t be put off if homeownership is something you are dreaming of – 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, of ESPC Mortgages, advises considering 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 thinking of selling your home this year, you might be wondering how the timings could affect the prospects of your potential buyers. However, experts believe that now is a good time to sell your property, 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’re a homeowner planning to stay in your current property, you may benefit from the current low interest rates. Paul Demarco explains: “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 portfolio, or for those considering the world of property investment to take the leap. Tenant demand is continuing to rise and stock levels remain low, so the time is ripe 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.”

How will tenants be affected?

Over recent months, rental prices have continued to rise, with Edinburgh’s one-bedroom properties renting for £813pcm on average, an all-time high. Combined with low stock levels, tenants are finding it harder than ever to secure a rental property, and may be worried about how to find a home in this frenetic market.

“My recommendation is to be keen and organised,” advises Nicky. “Register to receive alerts for properties that meet your criteria, and call agencies and landlords, as it will make you stand out in a sea of email enquiries. Be upfront and honest, and provide as much information as you can - landlords are looking for great tenants, so let them know just how great you are!”

The final word

“It’s understandable that buyers, homeowners, landlords and tenants will all feel concern when looking at the headlines and trying to do the calculations,” says Paul Hilton, CEO of ESPC. “But at ESPC, we’re here to offer advice and reassurance, whatever your property predicament. If you have questions about buying, selling, renting or letting a property, our property experts and independent mortgage advisers are on hand to help you, and we have lots of ways for you to get in touch for free advice – simply head to espc.com to find out more about the services we can offer to help you succeed on your property journey.”

Find out more

For free, impartial and no-obligation property advice, ESPC offers a range of services to support you. Find out more about our free drop-in advice sessions, phone advice service and virtual webinars here.