After an eventful 2021, property prices in the UK were boosted to an all-time high. The stamp duty holiday, mortgage guarantee scheme, more disposable income and the home working boom helped first time buyers get on the property ladder and homeowners relocate.
Now we’ve come out of the other end of 2021, there is more certainty surrounding employment, flexible working, and the government’s property schemes have ended, it’s likely that we’ll start to see the property market begin to steady.
Striking a balance between supply and demand
Rightmove reported that house prices rose by 3.4% in the final quarter of 2021, the highest quarterly rate since 2006. House prices are expected to continue rising due to the change in demand, supply and reduction in remote working throughout 2022.
As the population continues to grow, there is a rising number of people looking to buy a house. With such uncertainty in the market, many sellers or those thinking about selling their homes are withholding advertising their properties until they have secured a new property. This has created a significant gap between the number of buyers and the number of houses on the market.
House price growth will slow down
Rightmove also predicts that the national asking price of a home – which is currently £342,401 – will rise by 3-5% by the end of 2022. This is an increase of about £17,000.
The same Rightmove report states that the company has already seen a 19% jump in January 2022 in the number of people requesting home valuations.
It appears homeowners are getting ready to move in 2022, meaning there may be more properties for buyers to choose from which will also slow down the pace of price growth. This may help to drive house prices back down from this record-breaking high.
However, demand now that we’re emerging from the pandemic may start to slow down, meaning there are more sellers openly releasing their properties on the market that can satisfy demand. This balance may also help reduce the backlog of transactions that built up in 2021 due to the exceptionally high number of sold properties.
Mortgage lending will fall
UK Finance predicts mortgage lending will drop by £35bn in 2022. This will bring mortgage lending down from its peak of £316bn in 2021as the market is set to return to more stable levels.
With fewer people buying homes, mortgage lenders will see less activity from first time buyers. They may see more activity from homeowners making the decision to remortgage their properties to get a better deal following so much change to the market over 2021. However, mortgage rates are set to rise this year, as the Bank of England raised interest rates from 0.10% to 0.25% last month in a bid to bring inflation rates down.
A steadier 2022 lies ahead
2021 was an anomaly in the UK housing market. Following the end of government schemes, economic recovery, and changing housing needs, 2022 is set to be slightly less frenzied. Striking a balance between supply and demand, slowing house price growth, and a fall in mortgage lending will see the UK property market becoming more stable throughout the year and beyond.