Changes to Expect from the Property Market in 2022

In a climate of economic uncertainty it is difficult to think that there could be much certainty with the direction of the property market in 2022. Some analysts seem to be quite forthright with their positive predictions and they think the success of property market that has been seen during the pandemic will carry on for another year. Others of course have a differing opinion and with Interest rates hiked and the increase in household costs such as heating bills and price inflation, this might put a damper on house price affordability and the average house price.

Slower House Price Growth

Thisismoney say that its’ “increasingly likely that prices will at least grow slower next year” even though the rate of house price growth has increased in 2021 where we saw 8% growth, up from 6% during 2020. There now seems to be more reasons why house prices may fall rather than continue to go up:

  • Increased household costs such as the increase in energy bills will stretch budgets.
  • Inflation at the tills is increasing the cost of goods. 
  • Mortgages are set to become more expensive with the recent increase in interest rates.

All House Price Indexes Predict a rise

Surprisingly none of the house price indexes predict a fall in the average house price and they all predict a rise of between 0 and 5%. The predictions range widely so it is difficult to gain much confidence and shows uncertainty. For example Halifax predict a rise of between 0% and 2%, Rightmove predict a large price increase of 5% and Zoopla are still almost as optimistic predicting a 3% rise in 2022. With such uncertainty’s such as increased interest rates and inflation it is interesting to see that all house price indexes predict further growth. However, even if the property market does as well as the  5% growth that Zoopla predict this will still be half the rate of growth that we have experienced in the past year and 2021 showed an average increase house price of around 10%

House Prices may Slow at Different rates in Different Regions

The Pandemic has changed the landscape of what property areas we used to know as the house price winners. Nowadays, house prices have increased in more rural areas and beauty spots rather than in city’s such as London. Gone are the old days of London consistently increasing the most, during the pandemic people changed their working habits and being forced to work at home they have desired a larger living space. Depending on how the pandemic continues to pan out during 2022 the exodus from city locations to more rural locations may continue.

Entering 2022 we have the highest number of Corona virus cases in the UK since records began with the spread of the new Omicron strain. When entering 2021 there was an optimistic feeling in the air, the jab started to roll out and we were told that we will be out of this situation by Christmas. Unfortunately, this hasn’t been the case, two jabs haven’t gotten us out of the situation and with ideas running out of how to stop the spread another lock down may become an option. 

How will another Lock down affect the Property Market

If another lock down were to happen then that could change the course of the property market for good or for worse. It is strongly believed that the Stamp Duty holiday that was gifted to the UK population during the last lock down of 2021 is what buoyed up the property market and caused house buyers to enter bidding wars. Those days are now over, so without the fiscal measures propping the property market up there is less incentives for people to make a move. Additionally, there doesn’t seem to be the support of furlough or grants offered anymore and many businesses are still struggling, without this support and more people forced into unemployment then repossessions may cause prices to fall. More properties may appear at auctions at discounted prices and more people may need to sell their house fast to avoid being repossessed. It is probably the lack of available grants and available funds from the treasury that is stopping the Government from calling another lock down and on the 30th November Boris Johnson said that another lock down was “extremely unlikely”

Can repossessions happen in 2022?

Yes, since April 2021 mortgage lenders have been allowed to repossess homes. This was previously put on hold for around a year since the start of the pandemic. Furthermore, those who were financially affected by Coronavirus could receive a mortgage holiday and further extensions to the payment holiday could be added. Unfortunately, to the surprise of many, it was announced that those who required a further payment extension would have it negatively impact their credit report, this may cause problems if they want to sell their house and take out a new mortgage, forcing them to be stuck in their home. In 2022 there is no sign of such safety nets from the lenders and the added cost of increased mortgages due to the recent interest rate rise could cause further repossessions

More People Staying put and Releasing Equity

House prices have risen an average £34,000 since the start of the pandemic and people have more equity to release. If the pandemic continues and people don’t want to switch mortgage products due to interest rate rises then more people will be tempted to release equity and renovate their existing home rather than move. 

More Favorable lending for House Buyers in 2022

There seems to be more favorable lending criteria on the horizon, banks have been told to remove affordability stress testing criteria which meant that you had to be able to afford a possible 3% interest rate rise. Many people would have been rejected for a mortgage that they could currently afford. Further generosity is being given to house buyers in 2022 with longer term mortgage products being made available. For example a 40 year mortgage term allows the buyer to borrow 7 times their earnings if they are in an approved profession.