With the situation in the eastern part of Europe and the general economies of Europe and the United States, it may appear we are heading towards an economy which is slowing down and possibly heading towards recession.
However, with anything related to economics, especially during a downturn, this is usually temporary. So, wherever you may be in your home buying or selling process, bricks and mortar is traditionally an asset that is held on to longer sometimes through several recessions.
How pricing may be affected
Due to the rapid rise in inflation the cost of goods has increased. The Bank of England is trying its best to battle this inflation by increasing interest rates.
This is can make money more expensive and slow down the economy to eventually down prices again. This will eventually affect the property market, but for now, it's primarily affecting the cost of a mortgage.
With interest rates going up, the payments for new mortgages, or mortgages with variable rates, have gone up as well. This may entice more people to choose to sell their homes, but with the cost of money getting higher, the pool of buyers may start to shrink since there are fewer that may qualify or be willing to pay the higher price.
What happens if the economy gets weaker?
In our current state, if we do end up going into a recession, there is a possibility that the price of property may start to decrease.
Eventually, with the cost of homes going down, and as the economy starts to recover, we will end up in a period of growth which should normalise the property market. This will be alongside a flush new batch of buyers willing to buy these homes at what may appear as a discount.
Yet it is impossible to foresee how long any recession would last and at which point property prices will recover, so your overall long term goals need to factor this in.
If you’re looking at buying property for the long term, then consider locking in rates while they're still relatively low and refinance if they go lower. Look at your investment's horizon versus being concerned about what several months or a couple of years may do to the market.
If you're reviewing it purely as a short to mid-term investment, then there are a lot of unknowns, and as with any type of investment, you should tread cautiously with as much information as possible.
Downturns in economies are generally few and far between, and while there are definitely opportunities in these times, eventually, purchasing power will go down significantly due to some people only being able to afford the necessities for an undetermined amount of time.
Make sure to always work with experts
Regardless of whatever approach you end up taking or which stage in the process you're in, you want to make sure you've teamed up with experts in their relative fields.
You want the right property professionals including your legal team, estate agents and surveyors to help explain the lay of the land and you should also ensure that you work with a conveyancing service with your best legal interests in mind. This way, you can easily navigate any pitfalls and focus on the process of getting all the necessary paperwork and transfer of deeds and titles to confirm your ownership.
There is no reason why you should go into this alone, especially when you are not sure yourself where the local economy is headed and just how high the interest rates are going to continue to go up. Unfortunately, they have already gone up significantly. The Bank of England has a certain target to bring down inflation which they are not on track to hit, so only time will tell when that goal will be achieved.
Either way, when you work with a conveyancing team such as ourselves, although we cannot look at a crystal ball to tell you where the economy is headed, we can make sure that all your property transactions are fully in order and completely legal.
Put yourself in safe hands with Arrow Conveyancing. We’re friendly, reliable and very experienced. Call us to discuss your purchase or sale.
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The information contained in this article does not constitute financial advice or recommendation and should not be considered as such. Arrow conveyancing does not offer financial advice and is not regulated by the Financial Conduct Authority (FCA), the authors of this article are not financial advisors and are therefore not authorised to offer financial advice.