2021 Was An Exceptional Year, What Will Happen In The Property Market In 2022?
The National Association of Property Buyers Property Market Review 2021-22
Most will agree that 2021 has been quite an exceptional year in property – but for reasons no one could ever have predicted. As it comes to a close the NAPB considers a few of the most significant factors in the market, and looks ahead to what could happen in 2022.
The UK Economy
* The economy, so crucial to the property market, has performed more strongly than most forecasts predicted. Furlough kept things moving in 2020 and 2021.
* Economic growth at 5.5% in the second quarter fell to 1.3% in the third quarter1 – perhaps satisfactory in the circumstances. Most businesses have rebounded relatively well. Employment levels are currently good at only 1.3% less than pre-Covid.2
* Inflation could top 5% in 2022 according to the Bank of England3 which combined with higher taxes could pose a risk.
* The market has been supported (and has boomed) on the back of cheap mortgage money in recent years.
* Low interest rates CAN’T continue and WILL rise in 2022 potentially reaching 0.75% in 2022 according to reliable forecasts.4 The impact on the market is likely to be gradual however.
Housing Supply and Demand
* The UK property market continues to be affected by a housing shortage – at least 1.2 million homes according to BBC research.5 Despite more housebuilding supply is likely to remain short for several years yet, which will support property prices.
* Construction costs are rising – materials costs reached a 40 year high in 20216 – which could hamper future supply.
* Lockdowns and work from home have changed what people look for in a place to live and this could be a factor in the years ahead.
Prices and Rents
* A much-forecast market crash (even before Covid came along) did not happen. Buyers remained confident and fuelled by intervention like the Stamp Duty holiday prices surged to record levels in many places in 2021. The UK average house price reached almost £270,000 in summer 2021 according to HM Land Registry.7
* Most professional forecasters expect property prices to keep on rising every year from 2022 to 2026, but not as much as the heady heights of summer 2021. Forecasts from NAPB members (see below) suggest single digit price growth, perhaps up to 5%, in 2022.
* After an uncertain time for landlords the lettings market looks to be on an upswing – rents reached a 13 year high in major cities this year.8 There’s no doubt however that changing legislation is making being a landlord more demanding.
* Government action both pre- and during Covid has shaped the market we have today. What might the Government do next that might shape the property market in 2022 and beyond?
* Factors to consider as well as the economy and taxation include incentives for home ownership, the levelling-up agenda, planning reform and the countdown to the next General Election.
What Our Members Think
Professional property buyers are well positioned to understand the pressures on and trends in the property market. Here’s what some of our NAPB members think about the current market and the outlook for 2022.
Panni Bibiris, Head of Home Buying Team at Property Rescue comments:
“At Property Rescue we continue to assist homeowners in a fast evolving and challenging economic climate.”
“The property market has experienced ups and downs in 2021 triggered by unnatural stimulus but as things settle down and normal rhythm resumes in 2022 there will undoubtedly be further disruption and casualties of the pandemic, and we envisage this will continue for some time to come.”
Ruban Selvanayagam of Property Solvers Home Buyers/Auctions comments:
“It’s never easy to make predictions. But, whilst we believe that the market is likely to remain buoyant, inflation risks (for which there’s an argument to say are not entirely transitory) and increased supply could stem the aggressive price growth witnessed in 2021.”
Cormac Henderson, CEO at Spring says:
“The great migration, driven by hybrid working and desire for space, will see suburban prices grow 3-5% over the next year, while urban prices remain modest at 0-2%.
“As stock imbalance continues, many large family homes currently occupied by retirees could be released if Government incentives such as Stamp Duty breaks for downsizers and more purpose built later living homes are created.”
Lauren Burrows from UK HomeBuyers comments:
“2021 will always be looked back on by property experts as a year that more than exceeded expectation. Covid related policies have helped the UK market, making it the busiest year for transactions in nearly 15 years.For 2022, we believe the market will start to slow with the possible issues of supply and demand, and the increase in mortgage rates deterring potential buyers.”
Jonathan Rolande of House Buy Fast concludes:
“2021 saw great upheaval and a social shift that is slowly returning to ‘normal’ but some aspects may well have changed forever – Covid will live long in the memory and people will increasingly prefer property with outside space and an option to work from home. Prices look set to increase in ’22 but percentages will vary on property type and location.”