Annus mirabilis in 2021 — but what’s in store for 2022?
Last year proved very busy, not just for us but for most of the UK property market. Business remained surprisingly resilient even after the stamp duty holiday ended in September — but will it continue in 2022? According to major portal Zoopla, one in 16 of all homes in the country changed hands in 2021, making it the most active year for the housing market since 2007.
Nationwide reported in January that the UK housing market had made its strongest start to a year since 2005, with annual house prices reaching their highest since last June. The country’s largest lender, Halifax, said prices reached a new high in January — up almost ten per cent per annum.
That’s not good news for all, as the first step on the ladder remains a daunting prospect for most without help from the Bank of Mum and Dad or Grandma and Grandpa. Despite record numbers of first-timers last year, many still face challenges saving deposits and repaying mortgages.
Covid is said to have changed nothing but accelerated everything — and property is no exception.
Lockdown prompted significant changes in work and commuting patterns. As a result, properties offering flexible accommodation including work-from-home and garden space, away from the centre of towns and cities, became much more popular. However, addressing the lack of supply in the places where most people want to live has dominated the housing market and underpinned prices.
The stamp duty concession and cheap mortgage finance last year added fuel to the fire and contributed to a release of pent-up demand as restrictions were relaxed.
However, the rapid spread of the Omicron variant and increasingly stretched affordability prompted by rising interest rates and inflation are beginning to redress the supply/demand imbalance.
Stock levels will not be boosted by a huge influx of brand-new homes. Housebuilding rates nationally have fallen to around 200,000 a year despite the Government’s annual target of 300,000 new homes by the mid-2020s. The shortfall has been caused not only by the pandemic but by uncertainty over Brexit as well as the resultant high cost and shortage of materials and labour. We’ve noticed less interest in refurbishing property locally for the same reasons.
On the other hand, supply still cannot keep pace with demand — especially for family houses — and with around 40 per cent of homes owned outright there are many who are relatively unaffected by the interest rate uplift.
We know from what’s happening in our offices that some who thought prices could go only one way are starting to make their properties available for sale again.
But what will happen for the rest of the year? Transaction numbers and mortgage approvals — always a good indicator of direction of travel — are returning to pre-pandemic levels. A large proportion of buyers who previously missed out due to strong competition last year and had little choice but to rent are starting to look again. Many are taking a strong liking to some of our large selection of brand-new houses and flats locally, where lack of an onward chain can make them much easier to buy.
The London market is more dependent on international buyers, who have been sitting on their hands lately, although we’ve recorded an influx from Hong Kong for the past year or so as travel restrictions have eased. Aspiring buyto-let landlords are also on the look-out for properties in greater numbers, attracted by lack of stock and rising rents. We expect the overall shortage will continue to support prices in 2022 and is more likely to compromise transaction numbers than rising interest rate rises.
Though the pace of price growth is slowing, recent market surveys are continuing to demonstrate the market’s underlying strength, confirmed by what we’re seeing on the ground. Concerns over the acceleration in the spread of Covid and other variants, as well as return in part at least to working from home, will inevitably contribute to another build up of pentup demand.
The banks’ relaxation of lending criteria and the best choice of especially high loan-to-value mortgage products for over a decade certainly won’t do any harm either.
On the other hand, a significant price correction is unlikely, as the laws of supply and demand will keep prices relatively high for some time. The pandemic boom may be over but more steady price growth is the likely outcome.
Last year saw the most active housing market since 2007’
The boom may be over but more steady price growth is likely’