Property Market Update - Double-Digit Growth Continues

Double-Digit Growth Continues

Property market growth remains robust. During the initial stages of the pandemic, there were numerous predictions of a property market crash. However, this remarkable and resilient market has proven otherwise. Over the past six months, property prices maintained a steady growth. Furthermore, if you keep up to date with the market, you will know how the Northern regions have surpassed the Capital with incredible market performance.

Unsurprisingly, the Yorkshire & the Humberside, North West and West Midlands illustrated some of the highest regional growth rates across the country. Figures show that the annual house price growth in these regions hit 13.4%, 12.3% and 11.6%, respectively. On the contrary, market growth in London has steadily climbed to 7.4%.

According to data released by Savills, property prices in the regions of Yorkshire and the North West and North East will increase by 18.4% on average in the next five years. Predictions show that by 2026 prices in the Midlands will also increase by 15.9%.

property market Annual house price growth2

£206,432
Yorkshire Avg. Property
£228,967
North West Avg. Property
£263,945
West Midlands Avg. Property
£722,668
London Avg. Property

Inexpensive Markets Help Expand Property Portfolio

If you are looking to invest in a property this year, the north is a place you should consider. The region ticks all the boxes from excellent rental demand, significant capital growth projection and, most importantly, the north presents one of the most affordable housing markets. In Yorkshire, you can acquire a property for £206,432 on average, whereas, in London, you could be paying up to £722,668 on average.

Investors who choose to inject their money into inexpensive locations can ultimately get more for their money and expand their property portfolios much more quickly. Additionally, the affordability of each property market across the UK varies drastically.

First-time buyers struggle to save.

Higher Prices, Larger Deposits

Despite the substantial number of people furloughed during the pandemic, employment growth has remained strong this year. Hence, unemployment rates plummeted to 3.8% from December 2021 to February 2022. Across the UK, inflation rates have peaked to 7% (Bank of England). Inflation has amplified since the Ukraine invasion. As a result, levels of trade and stock supplies have also plunged. Subsequently, the construction industry is affected by limited resources, as build costs have soared.

Nevertheless, inflating property prices are outstripping the average household income, resulting in the current cost-of-living crisis. The average household income is not improving as fast as property prices, thus accentuating this financial crisis. Elevated house prices mean buyers must put down a much larger deposit. As a result, many first-time buyers struggle to climb the property ladder.

The average house deposit is 15% which is £41,100, nearly double the average earnings of an employee, sitting at £24,600. It is becoming a challenge to save for a deposit. Data released in a special report from Nationwide shows a third of first-time buyers received help to raise a house deposit in 2019/20 in the form of a gift, loan, or inheritance, a 27% increase from 25 years ago.

House Price to Earnings Ratio (HPER)

The Impact of Inflation

The house price to earnings ratio (HPER) continues to climb to a record high due to inflation. In 2019, the HPER was 7.7, now propelling to 8.9 (according to the ONS). To illustrate the struggle for first-time buyers looking to climb the ladder, the first-time buyer HPER has risen from 3.8 to 5.5! London has the highest HPER of 9.0. On the other hand, the north has an HPER of 3.5. Despite its impressive property market growth, the north is still the most affordable area to invest and live in.

Affordability is becoming increasingly challenging, and so is attaining a mortgage. This month the Bank of England increased the base rate to 1%, which will affect those on a variable-rate mortgage.

Reducing the Gap Between

Supply & Demand

The property market was becoming accustomed to the widening gap between the housing supply and demand imbalance. The chronic shortage of housing supply led to increased competition in the market. This enhanced competition caused property prices to climb on an upward trajectory. Prices will continue to grow as demand for houses outstrips supply. In 2020, around 255,000 homes were built, rivalling Q1 2022, where the figure sank to 238,500.

How did the supply and demand imbalance grow to an unsustainable level? Initially, soaring demand emanated from buyers looking for more space and revaluating their home requirements during the lockdown period. However, the lack of houses available in the early stages of the pandemic was due to several factors.

homeowners not selling their homes
Due to COVID restrictions, house viewings were also on hold
Due to border closures, construction materials were shipped across, therefore delaying the process
construction workers off work due to COVID

However, there are now more homes available on the market. From January to March, stock arriving to the market has risen gradually. This steady increase in availability will reduce the substantial difference in supply and demand across the UK. The market has not yet returned to pre-covid levels as supply is still 44% lower on average.

Above Average Levels

Market Activity

Activity in the market is continuing at unprecedented levels. Moreover, in April the sales agreed on rose to 18%, higher than pre-pandemic levels. Subsequently, this will influence the number of transactions. As reported by TwentyCi, the number of transactions in March hit 111,000, 12% above levels in 2017-19. Furthermore, Nationwide recently conducted a survey that showed that 38% of people are considering moving homes this year. In the short term, this will drive more sales. Therefore, we predict the market will now be slowing down any time soon.

Strongest Growth in Decade

Rental Market

According to UK Finance, the number of new buy-to-let loans granted in February 2022 was 37% higher than before the pandemic. Therefore, illustrating the intense market activity and the growing number of people looking to invest in a secure and profitable asset. Property investment is one of the safest investment vehicles in comparison to NFTs and Cryptocurrency. Albeit the rise and fall in market conditions, growth remains strong in the market, especially if you are looking for a lucrative, long-term investment.

The rental market is also continuing with speed. In the year to March, rents rose by 11%, nearly 1% month on month. Nonetheless, with more landlords entering the market, rental prices will steady. Currently, the market is witnessing the strongest rental growth in a decade. A report released by Nationwide highlights a 7% increase in the number of people looking to rent a property this year. Therefore, increasing the rate to 47%, displaying that rental demand will not drop in the near future.

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