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What is the Forecast for the Housing Market in 2022?

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Covid-19 caused considerable changes in the UK property market in 2021. The market remained resilient despite the economic shock caused by the health crisis. In fact, market players are hopeful that this holiday season will lead to an eventful 2022 and a year with lots of new opportunities.

Finalizing Brexit and finding a vaccine for the South-African and future variants should cause the demand for homes to soar to new levels.

So then, will the factors pushing the market higher continue into 2022?

Factors that Drove the Property Market in 2021

·         Stamp Duty Holiday

The stamp duty holiday introduced in July 2020 and ended in September 2021 is a factor that pushed prices higher in 2021. Indeed homebuyers of houses under £500,000 saved up to £15,000 due to stamp duty holiday.

So the cutting of stamp duty prompted more transactions, and the end of the tax break didn’t dampen housing market activity. Actually, more people want to buy a home, while the severe quality housing shortage and stiff competition among lenders have made financing widely available and affordable.

Thus finding the right roof over one’s head is the priority over timing the market and getting a better deal.

·         Remote and Home Working Options

The Covid-19 pandemic fueled a shift from office to flexible remote working. This has motivated homebuyers to search for larger properties that can offer separate space for a home office as the new normal continues.

As a result, there is a huge demand for properties in picturesque and rural locations. Remote workers are looking for houses outside urban centers, thus increasing the demand for houses than in previous years.

These two factors have maintained the property market active during the end of the year compared to the seasonal market slowdown reported in previous years. In fact, the number of sellers dropped by 30% as the demand for houses continued to grow.

The question is, will the soaring inflation and expected interest rates rise in 2022 maintain this demand for houses in the UK?

Will House Prices Go Up in UK Come 2022?

As companies embrace flexible hybrid working options, the UK property market is expected to maintain this momentum in 2022. This is especially so as UK households prepare to move homes in 2022. In fact, it’s forecasted that the property demand will linger around 20%, which is above the five-year average. The supply will remain lower than the demand, thus pushing house prices higher. So then, any expected changes in the property market are likely to lock out many people out of homeownership.

The government version of the Help to Buy equity loan scheme that ends in March 2023 is expected to maintain the property market trend in 2022. The program will allow first-time buyers to afford a home with just a 5% deposit.

On the other hand, the two-year red-hot increase is not likely to go beyond 2022. According to The Guardian quoted above, the boom in the UK house prices will end as the household finances get increasingly stretched. The rise of interest rates from 0.1% to 0.25% is likely to dampen the appetite for spending because of strained budgets. It’s also forecasted that the interest rates will rise further in 2022 to subdue the rising inflation that touched 5.1% in November.

Additionally, the end of government support measures will cause the house price in the UK to slow down considerably. However, this forecast has a large degree of uncertainty because it’s unclear how long the savings accrued during the health crisis are likely to boost the housing prices and transactions. Further, it’s unknown how long the recent shifts in buyers’ housing preferences is likely to last.

So then

First-time buyers struggling to afford a new home or concerned about the too few homes available in the market can quickly figure out their payment even as they plan to jump onto the property ladder.

 

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