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The property market is to record its strongest year since 2007, but will 2022 be just as strong?
Recently, Zoopla published data predicting that around 1.5 million sales will take place by the end of 2021, making this the strongest year for the housing market since 2007. Many factors have contributed to this boom. The race for space, low mortgage rates, and stamp duty holiday have all driven demand up to new heights. The momentum of the market, however, can not go on forever.
As we enter 2022, our outlook should be optimistic. When you compare the property market to this time last year: the impending stamp duty deadline presented the possibility of a crash, on top of the uncertainty of the pandemic. This made for an extremely bleak property market forecast. Yet, what many experts did not predict, is that 2021 has been the strongest year for property sales since 2007.
Economic recovery is in full swing. A bright future post-COVID is on the horizon. The question is, what effect will this have on the property market? Is 2022 the year to invest? Will there be a crash in house prices? Here is everything we know:
Levels of Demand Remain
The most part of 2021 is behind us. Stamp duty holiday has been officially phased out and the congestion is beginning to ease. As we move into the new year, we can expect a gradual slow down. The ending of stamp duty could have resulted in a drastic fall in property prices. However, the momentum caused a sustainable price growth for the new year. As a consequence, 2021 is on track to be the strongest year for sales and house price inflation since 2007. Over £473bn of new sales were agreed in 2021, £95bn higher than 2020.
Although stamp duty holiday was a huge driving force, there have been other, greater influences shaping the market. We know this because even throughout the phase-out of stamp duty, demand did not drop off as significantly as expected. The demand for housing continues to run 20-30% higher than average. Consequently, we are ending 2021 with considerably more demand than last year, and we expect this will project into 2022.
House price inflation will continue if the lack of housing supply remains. Overall, the UK remains a comparatively affordable place to buy a home. Yet, the rate of growth varies drastically from city to city. Outside of southern cities, house prices are rising way above the national average, which was 6%. Strong performers such as Liverpool (9.4%), Manchester (7.7%), and Sheffield (7.4%) are well exceeding this. Going forward, we predict growth will slow to 4% – 5% but will retain momentum in cities where house price growth is strongest.
Will the pandemic still influence the market?
The pandemic has not been short-lived, as we know. Despite things returning to a ‘new normal’, the impact of the pandemic still has further to run. In a survey conducted by Zoopla, 22% of UK households remain ‘eager’ ‘or ‘very eager’ to move home in the next 18 months as a direct result of the pandemic. The primary reason for those wanting to move was their home not suiting their current requirements (46%). The shift towards hybrid working was a huge motivation for the ‘race for space’. This is a pattern we expect to continue through to 2022, thus, encouraging activity in the market.
Which regional markets will be
The national average is never a reflection of regional markets as there is so much variation across the UK. In certain northern cities, house prices are rising by over 10% per annum. Conversely, in southern cities, growth is negative. On a national level, house prices will continue to rise, albeit at a slightly slower pace than the busy market of 2021. The fastest-growing markets will be in the North, in particular the North-West. Key locations such as Manchester, Sheffield, Leeds, and Liverpool are all ranking highly on the league tables.
In Central London markets, we would advise investors to be cautious. Whilst demand is always going to be high in the capital, price growth appears to be lagging in comparison to national levels. This is because the north-south divide is closing, as the economy begins to balance out across the UK.
With another turbulent year behind us, investors are right to question what will happen to the property market in 2022. The property market defied all expectations during the worldwide pandemic and prospered through a recession. Therefore, we can trust that the economic forecast for 2022 is positive. Not only are property forecasts across the board predicting a further, national rise in property prices, but we expect rents to increase too.
In terms of what we can expect of trends, as buyers continue to prioritise space, we expect the growth difference between houses and flats to widen. However, apartments with extra communal space and amenities, such as rooftop terraces or office space, are likely to soar in demand too.
We expect the momentum from the stamp duty holiday to keep property demand sustained in 2022. Not just in established cities, but emerging cities too. There is a buzzing optimism around the 2022 economic projection. The UK is making an effort to build back stronger, which will encourage future property expansion.
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