Will house prices go down in 2022?
In the property industry, a New Year brings the age-old question of whether house prices will go down over the next 12 months and whether now is a good time to buy a house. To understand what might happen in the housing market in 2022, it is important to reflect on where things stand today. With the average property price reaching record highs, Surrenden Invest looks at what factors will shape the market over the next year.
The average cost of buying a property in the UK stands at £268,349
On average, house prices increased by 6.9% in the year to October
Northern Powerhouse cities continued to record the strongest growth rates
Property hotspot Newcastle recorded a +4.8% rise in the year to October 2021
What happened in 2021?
Across the board, data analysed by the industry’s biggest names have shown that UK property prices increased at a double-digit pace throughout 2021.
The latest UK House Price Index – released in December – has reported that the average cost of buying a property in the UK stands at £268,349. This figure is 10.3% higher than the average values a year earlier. Data released by the mainstream lender, Nationwide, support this growth rate, recording the average cost of buying a property at £252,687 – up 10% since November 2020.
The vast nature of the UK’s property market means that indexes will differ based on the composition of the data available to the body at the time of release. Therefore, buyers keeping a close eye on the nation’s property market should delve deeper into headline stats by looking at the regional performance of the property market they are considering for investment in 2022.
Those looking for an in-depth analysis of property prices on a city and regional level are likely to be reassured by the most recent Zoopla UK House Price index, which compares the performance of 20 UK cities. The most recent index reported that, on average, house prices increased by 6.9% in the year to October, with the rate of growth starting to ease following the end of the government’s Stamp Duty Holiday incentive in September.
Despite the slowdown, the report emphasised that the average rate of growth recorded over the last three months is significantly higher than at any time since 2014, helping to highlight the current strength of the market.
Overall, the UK’s largest regional cities significantly outpaced the 2.4% rate of house price growth in London. Northern Powerhouse cities continued to record the strongest growth rates with a +10.6% climb recorded in Liverpool, +8.7% in Manchester, and +7.9% in Sheffield. Even at the lower end of the index, regional property hotspot Newcastle recorded a +4.8% rise in the year to October 2021.
Elsewhere, the UK’s Second City Birmingham recorded an impressive +6.3% growth rate.
Commenting on the overall performance of the marketing during 2021, Jonathan Stephens, Managing Director of Surrenden Invest, said:
“Over the last 12 months, property prices across the nation have continued to rise steadily, and while London’s market has slowed to a certain extent, regional markets have gone from strength-to-strength. This is a trend that we expect will continue throughout 2022.”
What’s happened since the pandemic?
The UK’s property market experienced significant changes throughout the pandemic. From the complete closure of the market during the first national lockdown in March 2020, where the number of properties sold reached the lowest levels since records began, to the introduction of a Stamp Duty Holiday and record-low interest rates, the industry has undoubtedly displayed its resilience during the pandemic.
It is safe to say that Covid-19 dramatically altered everyday life, with many people experiencing a shift in the amount of time spent in the office and commuting to work.
Naturally, this pattern has been reflected across the property market, with homebuyer and renter habits changing over the last 18 months. According to a survey about what people want from property conducted by MFS, a garden or outdoor space is the number one feature for homebuyers in 2021. Square footage is ranked second and access to fast broadband and mobile connectivity third.
The survey, undertaken by 2,000 UK adults searching for a residential property, also highlighted the need for space. The number of Londoners who moved out of the capital and into surrounding areas boosted countryside property sales by £5 million.
However, it is not just the sales market that has undergone changes caused by Covid-19. The easing of lockdown restrictions in the summer and a return to city centre living pushed rental growth to the highest level in 13 years in Q3 2021.
The latest Hometrack Rental Market Report has revealed that average UK rents increased by 4.6% in the year to September. The resumption of a more ‘normal’ life and the commencement of a new academic year have been attributed to a sharp rise in the cost of renting.
Despite the upheaval caused by the pandemic, the demand for property across the country has remained strong. Those considering investing in the sector should pay close attention to trends on the market to secure the best potential gains.
Housing market predictions 2022
It seems obvious, but, at this point, it is worth highlighting the importance of differentiating between the easing of house price growth and values decreasing. For those looking to buy property in 2022, it is doubtful that property prices will dramatically decrease over the next 12 months. Instead, buyers will find that the rate at which values will climb will ease.
Throughout 2020 and 2021, buyers rushed to the market to maximise the government’s Stamp Duty Land Tax (SDLT) savings. As a result, in 2021, it is thought that 1.5 million property transactions will take place. However, the time-sensitive incentive has ended, and transactions are expected to fall to 1.2 million in 2022, which is more in line with the 5-year average.
The window to complete property purchasing during the SDLT naturally created a competitive market. Propertymark’s Housing Market Report reported an average of 19 buyers for every available property.
However, with the urgency to complete now over, property prices are set to continue to rise throughout 2022, with the rate of growth expected to ease. According to Savills, the UK’s mainstream housing market can expect a +3.5% growth rate throughout 2022, citing a shortage of available homes to push prices upward.
Across the property sector, forecasts generally align with this growth rate, with Zoopla expecting a +3% increase, whereas JLL (+4.5%) and Rightmove (+5%) are slightly more optimistic.
In terms of demand, market experts at Zoopla expect that buyer demand will remain strong moving into the new year, with the sector beginning to ‘normalise in 2022’. The property portal cites low supply levels to underpin prices across the next 12 months.
Based on market predictions, it is unlikely that house prices will go down in 2022. Instead, those searching for a property will be comforted by an easing of price rises; however, with a high demand for housing, buyers will likely need to act fast to secure their investment.
The average cost of renting is £1,058 per calendar month
Bank of England’s decision to raise interest rates from 0.01% to 0.25%
Construction of new homes well under the government’s target of 300,000 new builds per year
Savills predicts a total 5-year price growth of 18.8% in the North West and Yorkshire and Humber