House prices soared in 2021, and with experts unclear as to whether
growth will continue in 2022 we examine what you need to know
House prices could stabilise in 2022 following a red hot year for the
housing market in 2021, but many uncertainties lie ahead, experts say.
The
average UK house price rocketed up by 10.2% over the past 12 months to
£285,000 in England, according to the Office for National Statistics
(ONS). Reasons for this included the stamp duty holiday, a shortage of
available properties and the 'race for space' - a desire for homebuyers
to live in bigger homes following multiple lockdowns and the move to
working from home.
But, in potentially good news for those buying before renovating a house,
some experts project price growth to calm. James Tatch, principal, data
and research at UK Finance, told the PA news agency: “We’re seeing a
return to a stable path for new lending, for (2022) onwards.”
However, David Hannah, principal consultant at
Cornerstone Tax, says that many uncertainties in the UK housing market
as we head into 2022, with one of the predominant problems being the
current supply within the UK housing market.
Read on to see whether experts predict a cooling of the market in 2022, and why housing activity has thrived throughout 2021.
What to Know About House Prices in 2022
Some
experts believe the market will cool in 2022, but the combination of
stronger buyer demand coupled with a shortage of available properties
means that the market could remain healthy for a while to come.
"The inbalance
between supply and demand has, inevitably, raised the average UK house
price," says Hannah. "A solution to the global supply issues will cause
an increased supply of new builds, providing the UK housing market with
some much-needed extra stock, which should subsequently decrease the
average UK house prices, but there are many obstacles facing the UK
housing market now which has caused a lot of uncertainty”.
Tom
Bill, head of UK residential research at the estate agent Knight Frank,
says the Omicron variant could be a factor which affects interest rates
and the housing market, which could impact prices.
“Gravity-defying
price growth is the result of low interest rates and tight supply,
which are both things we expect to reverse this year, putting downwards
pressure on prices," he said.
And
Jonathan Hopper, chief executive of Garrington Property Finders, says
that the Omicron variant make some homeowners decide to wait before
putting their property up for sale, potentially cooling the market.
Why Have House Prices Rocketed up?
House prices soared in 2021, reaching record highs in multiple house price indexes (HPIs).
Annual
house price growth rose to 10% in November, up from 9.9% in October,
meaning the average UK property value is now £252,687, according to
Nationwide's latest house price index. Nationwide added that house
prices have risen to almost 15% above average prices in March 2020
before the coronavirus pandemic first hit the UK.
Reasons for this surge include the stamp duty holiday extension
and the new mortgage guarantee, two measures announced in the Spring
Budget 2021 which kept housing market activity buoyant. The 'race for
space' - with buyers seeking larger homes - has also been a factor.
But
many expected the market to cool once the stamp duty holiday - which
helped to fuel about 1.5m house purchases across the UK - ended in June
(prior to the tapering effect between July-September). This was
evidenced initially by annual house price growth falling to 10% in
Nationwide's September house price index (from 11% in August).
However, the stamp duty holiday led to a shortage of available properties and ongoing price rises could be due to this limited supply.
The
impact of soaring inflation and the rise in interest rates in December
could yet prove influential too and make it more expensive to buy a
house
Where Have House Prices Risen the Most?
Mountain Ash in Wales is the place in the UK where house prices rose the most in 2021, according to Rightmove, which experienced a 31% increase in asking prices for homes.
Wales
was also this year’s regional asking price hotspot, with average prices
up 10.5% in Wales compared to 2020. This was followed by the South West
(9.6%) and the South East (9.1%).
Meanwhile, separate data from a review of Office for National Statistics (ONS) data by HouseholdQuotes,
revealed that over the last 20 years, several London boroughs have
undergone dramatic increases in house prices, none more so than
Kensington and Chelsea, where prices have risen by £863,000.
Westminster
(£600,000), City of London (£540,000) and Camden (£505,000) have also
all increased by over £500,000. Corby, meanwhile, has experienced the
highest percentage increase in house prices, rising 246.49% between
2000-2020. A home in Corby used to cost £51,950 in 2000 and cost
£180,000 in 2020.
Prices Remain Challenging for First-Time Buyers
Growth
has exceeded earnings growth over the past year, and the ratio of house
prices to average earnings has increased to a record high, Nationwide
says.
A
20% deposit is now equivalent to 110% of average income - a record high
and up from 102% one year ago. This is proving a particularly changing
disparity for first-time buyers.
And
Yorkshire Building Society said this week that UK house sales to
first-time buyers reached their highest level for 19 years in 2021.
“Clearly,
new buyers have not been deterred by the price of a typical first-time
buyer home, which has increased by 9% to £222,997 in the year to
October,” the building society said.
The Legacy of the Stamp Duty Holiday
The
stamp duty holiday exempted tax on the first £500,000 of the purchase
price between July 2020 and June 2021, and has had a remarkable impact
on house prices.
Zoopla
said in its July house price index that it expected prices to edge
upwards by 6% in the coming months because of the clamour to make the
most the tax break, before eventually easing back to 4-5%.
Moreover,
the stamp duty holiday led to a shortage in supply of properties on the
market, with house sales 28% lower in October than a year earlier after
a record surge in activity earlier in 2021, according to HM Revenue and
Customs.
A
tapering effect began on 1 July which kept exemption at double its
standard level (£250,000) until the end of September. This dropped back
to £125,000 at the beginning of October.
Russell
Galley said in August that "much of the impact from the stamp duty
holiday has now left the market", but Jonathan Hopper, CEO of Garrington
Property Finders, commented on Halifax's November HPI: “So much for the
end of the stamp duty holiday taking the steam out of the market. It’s a
month since the tax incentive for buyers was finally withdrawn in
England, but you’d scarcely know it. The market is ploughing on
regardless."
Our Requirements Have Changed
The
pandemic has also been a key driver of house prices, and spending more
time indoors has changed the requirements of those looking to buy a
home.
Two-
and three-bedroom semi-detached houses were snapped up the quickest
this year, Rightmove says, with many families searching for more
spacious homes, following the shift to working from home.
Nick
Barnes, head of research at estate agency chain Chestertons, said in
September: “We expect activity to pick up as there is still substantial
unsatisfied demand for spacious homes, mortgage offerings remain
attractive and buyers are keen to get their lives back on track
post-lockdown.”
A Nationwide study from earlier this year revealed
that of those moving or considering a move, around a third (33%) are
looking to move to a different area, while nearly 30% are doing so to
access a garden or outdoor space more easily.
Greater Demand for Rural Locations
The
pandemic has also increased our desire for rural living. A recent study
by Moveable that 50% of Londoners no longer have the desire to buy a
home in the capital, with working from home continuing for many.
Their
research also discovered that 41% of home movers no longer consider
commute times when searching for a property, and 41% of home owners in
cities plan to move out in the next year to buy a house in the country.
Anthony
Codling, an independent housing analyst, adds: “Large numbers continue
to look for more space to facilitate working from home and countless
others are looking for additional homes to accommodate the emerging
hybrid working from home model of two to three days in the urban office
and two to three days in the rural or coastal idyll.
"Meanwhile, the number of homes for sale is not meeting demand and the outlook for prices is up not down.”
