Rising living costs are driving inflation. As well as significant price rises in staples such as bread and meat over recent months, energy and transportation costs have begun to spiral upwards with more price rises threatened.

However, Pantheon Macroeconomics — an independent UK consultancy who supply ‘economic intelligence’ to market professionals around the world — believe that inflation will fall back to below 2% by the end of 2023. Their predictions are read by banks, hedge funds, insurance companies and property specialists. They should know what they are talking about

Perhaps you are a little sceptical?

Their theory is based on the belief that the current inflation has been triggered by one-off forces such as the war in Ukraine and covid lockdowns, the effects of which will have more or less disappeared by next year. Pantheon think that the Bank of England base rate will rise to 1.75% this September, but that this will be the peak; it won’t rise any further in 2023.

Capital Economics see things rather differently. They think that the Bank of England rate will reach 3% in the second half of 2023. Their prediction of an average mortgage rate of about 3.6% is low from a historical perspective, but it is nevertheless more than double the 1.6% rate seen at the end of 2021.

None of us can predict the future with any certainty. But we can use our knowledge of the past and our judgement to understand the likelihood of any particular scenario playing out. So you might like to consider the following questions:

  • Will the war in Ukraine end this year?
  • Will there be any more lockdowns or other restrictions that might hamper business or people’s ability to earn money?
  • Will energy supplies be easily accessible in the coming months causing a reduction in prices?
  • Will food be available at prices most people can afford?
  • Will the triggers of the current inflation continue?
  • Will life be easier or more difficult for most people in 2023?

How you answer these questions will reflect your attitude to the causes of inflation, the cost-of-living issue and global trends. And it’s worth remembering that inflation is a great way for governments to reduce debt since it makes debt cheaper over time. Inflation isn’t always a bad thing for everyone.

But how does inflation impact the housing market?

Clearly there are a range of factors that can have an effect on property prices — supply and demand; interest rates; the state of the economy; the confidence of both prospective buyers and sellers. Inflation can drive house prices up, but it can also cause a loss of confidence and a stalling in the property market.

Whatever your views about what is likely to happen over the next few months and years, it is nevertheless true that there has been a loss in the momentum of the price rises we have seen in the property market over the last couple of years. If you think this is likely to continue — or that prices may actually drop — delaying putting your property on the market might not be a good idea.

If you are interested in discussing how to get the best price for your property, please contact Sarka or Rob on 01608 695252, or go to our web page  www.distinctpropertyconsultants.co.uk  and request an in-person valuation.  




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