Leading UK real estate company, Savills, conducts research into the trends affecting the UK property market and releases a monthly Housing Market Update, which takes a closer look at the UK residential landscape. The latest update for May 2022 reveals that “affordability concerns heighten, but demand remains strong, as house prices continue to grow.”
In this blog post, we outline the key findings from the report including the continued increase of house prices and rents; concerns around affordability and signs of a convergence between supply and demand.
House prices and rents rise
Data from Nationwide has shown that house prices rose by a further 0.3% in April 2022, which has led to annual house price growth to reach 12.1%. There is a similar narrative in the rental market, where rents are also rising rapidly – in fact, they have risen by 11% year-on-year in March and were up 1% month-on-month.
Often when house prices rise, it drives demand in rental properties, but Savills has revealed that in this case it is driven by a lack of supply. The current landscape shows that both buyer and rental demand is strong, so with the increasing affordability pressures looming in the market, an increased supply in the form of landlord instructions or buy-to-let developments will need to address this.
Affordability concerns continue
There are a number of factors which are contributing to the affordability concerns within the market. House prices and rental costs rising, especially when unmatched by income growth, is one of the main factors, but this is exacerbated by the wider cost-of-living crisis.
Lenders have also predicted a lower availability of mortgages as we reach the middle of 2022, which, paired with the Bank of England announcement that the base rate will increase to 1% by the end of the month, will make mortgages less affordable. Savills has predicted that this will reduce house price growth in the future, but we believe it will be first time buyers impacted the most as they continue to struggle to get on the housing ladder. It highlights the importance of developers delivering affordable properties in desirable locations.
Supply and demand convergence
Demand outstripping supply has been a hot topic over the past few months, and the latest Savills report shows the first signs of a convergence. It reported that “the number of homes on the market increased in each of the first three months of 2022, reverting to normal seasonal trends”, which is promising.
Despite the situation being far from solved, low supply hasn’t limited transactions which reached 111,000 in March, which equated to a 12% increase on 2017-19 levels. If the convergence continues then, it will offset some of the challenges in terms of affordability within the market.
GRE Assets has been delivering high quality, well connected homes in the UK and Spain since 2006.
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