UK inflation records sharpest drop since cost-of-living crisis began

Cornerstone Tax comments on news that UK inflation records sharpest drop since cost of living crisis began – falling to 8.7%, what does it mean for the property market?

The Office for National Statistics (ONS) revealed today that Britain has recorded the sharpest fall in inflation since August, with a drop in the annual rate to 8.7% in April. It marked a decline from 10.1% in March, as UK inflation peaked at 11.1% in October.

According to the data from the ONS, electricity and gas prices contributed about 1.4 percentage points to the fall in the annual inflation rate.

With the rate of inflation having an impact on the cost of a home, David Hannah, Chairman of Cornerstone Group International – the UK’s leading property tax experts – explains how the fall in inflation could aid those looking to buy a home in the UK and in particular, first-time buyers.

A recent report from Nationwide has found that the average house prices rose 0.5% last month following seven consecutive falls from September. The 0.5% rise means the average price has increased to £260,441, up from £257,122 in March. This has lifted the annual rate of house price growth to -2.7%, from -3.1% in March (the biggest fall since 2009), marking a return to composure in the market following the chaos of last autumn’s mini-budget.

In line with the findings from Nationwide, Zoopla reported at the start of April that there was a greater supply of houses on the market, 65% more than a year ago, as the average estate agent has 25 homes for sale compared to 14 in 2022.

Zoopla reported that the number of new sales agreed had risen 11% compared to 2019. Despite the calls from forecasters for the market to crash by 20% this year, it remains resilient, which Hannah believes is a testament to its historical stability and believes the fall in inflation could further aid the property market and house prices.

As inflation recently stood at a 40-year high, the impact of the rising cost of living caused many first-time buyers to delay their dreams on stepping onto the property ladder.

The average house price-to-earnings ratio hit a record high in the third quarter of last year, with the average home costing almost seven times the typical salary, according to the Nationwide Building Society.

However, the recent fall in inflation could stabilise house prices and offer first-time buyers more opportunities to buy their first home.

David Hannah, Chairman at Cornerstone Group International, explains:

“Unsurprisingly, we have seen a fall in house prices at the start of 2023; however we did see a rise in prices in April, highlighting a return to stability in the UK property market.

“The news that the inflation rate has witnessed its sharpest fall since August bodes well for the second half of the year for the housing market.

“The knock-on effect will mean interest rates on mortgages will fall back to a reasonable level and, as a result, this will entice first-time buyers back to the market, thus increasing market activity and confidence.

“I have always said that the UK property market has tended to be more stable than any other global property market, and if the rate of inflation continues to fall, I have no doubt we will see a return to confidence and stability for the second half of 2023 which I believe we are already starting to witness.

“Throughout the end of last year, record house price growth and inflation hitting a 40-year high impacted everyone looking to buy a house, with first-time buyers particularly affected.

“However, with inflation falling, property prices stabilising and new mortgage products being offered specifically targeted towards helping first-time buyers purchase a home, I think there is light at the end of the tunnel.”

Kindly shared by Cornerstone Tax

Main article photo courtesy of Pixabay