Will House Prices Keep Rising In 2022?
There’s no doubt 2021 was an interesting year for house prices. According to the latest Office of National Statistics House Price Index, prices increased by nearly 11% year on year. Wales posted the highest growth of 13%, with England and Northern Ireland the lowest at 11%. London continued to experience the lowest regional growth at 5%.
The UK property market was boosted by low interest rates, the Stamp Duty holiday and changing work habits due to the pandemic. But will house prices continue to rise in 2022?
Firstly, January was the busiest start to a new year ever experienced by the housing market. February was even busier, with a huge number of people determined to move in spring.
There is usually a rise in asking prices from January to February, but 2022 has seen the biggest jump in more than 20 years. The average price of homes in the UK has now risen by £7,785, hitting a record high of £348,804. This new record means that average asking prices have risen by nearly £40,000 in the two years since the pandemic began, compared to just over £9,000 in the previous two years.
London has seen the highest annual price growth since 2016, as Covid restrictions come to an end and people return to working in the city. The average asking price of a home in the capital has now reached £667,001.
What’s Behind The Price Growth?
Many people’s priorities are still altered after years of Covid restrictions and this month’s price growth is mainly driven by sellers who are ready to move on from their first homes in search of more space.
Buyer demand remains high, but there’s still a shortage of properties coming to market, so it’s very competitive for buyers right now. Many home-movers are rushing to put their properties on the market to make sure they can move quickly, giving them the best chance of securing their next home.
A fear of missing out is really driving market behaviour at the moment as buyers look to do all that they can to avoid disappointment.
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Will Prices Keep Rising?
There are some early signs of the pressure easing; there are more new property listings coming to the market compared to a year ago, giving buyers some fresh choice.
This should help to ease the pace of price growth as we head out of a busy spring season and into a more traditional summer housing market.
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What Could Bring Down House Prices In 2022?
1. Soaring Inflation
Inflation increased to 5.5% in January 2022, its highest rate in nearly 30 years. It is forecast to exceed 7% by June. High rates of inflation increase the price of everyday items such as petrol, energy and food. This reduces people’s disposable income and many may not be able to afford to move home.
2. The End Of Low Interest Rates
The Bank of England increased the base rate to 0.5% in January. According to Capital Economics, it’s likely to raise it further to 1.25% by the end of the year (which would be the highest rate in 14 years). The knock-on increase in the cost of mortgages would decrease housing demand.
3. More Supply
Limited supply helped to drive up house prices at the end of 2021. Propertymark reported the lowest-ever supply of houses on record. However, they recorded an 80% increase in January, which should help to boost supply.
4. Pulling forward of transactions in 2021
Rightmove’s Tim Bannister commented that “It’s been a hectic 18 months” with “changed housing needs driven by the pandemic inspiring many moves, and the Stamp Duty holiday encouraging some movers to bring their plans forward.”
The ONS reported sales volumes of 200,000 in June 2021, three times the number in June 2020. Demand is expected to return to a more normal level in 2022, which should have a cooling impact on property prices.
What Does This Mean If I’m Looking To Move Home?
March is often the month home-movers spring into action, and the best time of the year to put your property on the market. Competition between buyers is generally at its strongest at this time, providing sellers with the best chance of selling their home quickly for a good price.
Whether you are remortgaging, a property investor or first time buyers – get your conveyancing quotes here. Compare solicitors fees wherever you are in the uk and get the best quality and best price conveyancing possible.
