After a turbulent couple of years, there is much speculation as to what 2022 will hold for the UK property market from the perspective of developers, investors and residents.
Michael El-Kassir, Managing Director of GRE Assets, said: “As we emerged into 2021, we recognised a shift in buyer priorities. While affordability, connectivity and ongoing regeneration remained at the top of our investment criteria, we recognised that people were increasingly looking for the ability to work from home and access to green space, whether that is nearby parks, balconies, terraces, or gardens. Our predictions were correct and throughout 2021 spacious living areas, high-speed Hyperoptic broadband which can have you connected in minutes and large balconies or terraces with excellent views of the surrounding area, are among the features we’ve found have been most desirable for prospective buyers.”
Below, we identify the three main trends that we think will influence the market in 2022, including supply and demand, house price performance and mortgages.
Supply vs demand
One of the biggest challenges in the market of recent months has been the imbalance between supply and demand. According to Rightmove’s House Price Index (December 2021), the “available stock of property for sale has hit the lowest level per estate agency branch ever recorded by Rightmove.” This can be seen as good news for those wishing to sell as it can often indicate a quick transaction and a rise in housing stock value, meaning better returns for residents and investors looking to sell.
However, Knight Frank has speculated that “exceptionally strong levels of demand would be more evenly matched by supply in the early months of 2022”, which is positive news for first-time buyers trying to get on the property ladder and could slow the rate at which inflation is going up.
Labour shortages and an increase in the price of construction materials also exacerbated the lack of supply in 2021. The struggle to get staff and materials slowed down construction output and the rise in costs is made it harder for companies to predict build costs, as they are ever-changing. Things are looking more optimistic for 2022, with the number of construction companies reporting supplier delays decreasing to 34% in December compared to 47% in November. Prices remain high but they have stabilised making it far easier for developers to forecast build costs.
House price performance
Savills’ UK Housing Market Update reported the “highest annual house price growth for 15 years in 2021.” It was the ‘race for space’ and demand outstripping supply that Savills has credited for this growth, which is expected to continue for at least the next few months. House price forecasts for the UK as a whole are sitting at 3.5%, compared to 3% for the South East region. In the five years to 2026, house prices are expected to rise by 13.1% in the UK and 10.4% in the South East.
There are factors which look set to slow the rate of house price growth and activity in the market slightly including a decline in mortgage approvals, the fall in housing supply and rising interest rates. It will be first time buyers that will be most affected by this, meaning that it is more important than ever for the industry to deliver high-quality homes at the right price and in the right location.
The Bank of England base rate saw an increase to 0.25% in December 2021 and there is speculation from Which? among others that this could grow further. If this does increase, this in turn will likely result in higher mortgage costs for homebuyers.
The provision of longer term mortgages (currently up to 40-year mortgages), as well as rumours of 50-year mortgages being on the horizon, provide an option for first-time buyers to keep monthly repayments at a manageable level.
Green mortgages are an emerging trend, which can see better rates on properties with high energy-efficiency. The aim with these mortgages is to incentivise sustainable developments for buyers and this is something that is particularly relevant for those looking at new-build homes. Which? also predicts a growth of sustainable borrowing this year.
GRE Assets has been delivering high quality, well connected homes in the UK and Spain since 2006.