The real estate market has enjoyed an unprecedented boost for 18 months, with prices continuing to rise despite severe economic uncertainty. The average asking price for a home has jumped to £360,101 – an increase of £19,082 over the past three months – and buyers are desperate for lower prices to avoid overpaying for a home.
Additionally, research by estate agent Savills found that the average house price in 15% of the country has now reached £500,000.
But even in the face of the continued rise in property values, speculation is rife that prices could fall as the cost of living crisis continues unabated.
Soaring inflation, rising interest rates, tax increases and sky-high energy bills have all strained the finances of millions of Britons, forcing some to postpone their dream of buying a home.
Even at the onset of the crisis, many would-be owners gave up their search in hopes of lower prices later in the year. But do the experts think it will even happen?
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He explained: “If we look at what’s happened – the growth in property prices, the inflation in retail prices, the spike in energy costs, it’s going to put pressure on employers to they raise wages.
“I think wages will go up, which means real purchasing power won’t go down.
“If you borrow a hundred thousand pounds today, the fixed figure of a hundred thousand pounds does not increase with inflation.
“So five years from now, that debt is probably worth half what it’s worth today.
“In times of high inflation with relatively low interest rates, it makes sense to borrow.”
Some real estate experts have argued that this is why now is a great time to buy if you can afford the inflated prices.
Mr Hannah continued: “Debt is eroded by inflation, as the value of the asset (the house) increases in line with or ahead of inflation. It is a way to achieve real returns. “
However, Hannah noted that long-standing issues have driven prices up over the past two years and are still prevalent today. This means that a noticeable price drop for buyers was unlikely.
He said: “The problem we have is the rate of demand and supply.
“If builders build and they oversupply, that will dampen the increase and appreciation in asset values. But, if the number of people wanting to buy homes continues to outstrip supply, those prices will go up.
“We have an open market in the UK which means not only are domestic buyers and investors looking to buy, but we also have inbound investors and a number of people moving to the UK.
“Overall, I expect demand for UK housing to continue to outpace supply – pushing price increases ahead of inflation and provided wages rise, affordability of housing will remain unchanged.”