With 2021 coming to a close, house price growth has continued to rise – showing an extraordinary 11.8% annual rise in 2021. The question is: Will it continue into 2022? There is hope that the housing market will continue to rise throughout 2022, however, there are undoubtedly steps which need to be taken to achieve this. With a shortage of building materials occurring, due to the massive disruption caused to the global supply chain, increased interest rates and the end of the stamp duty holiday it means that the housing market will ultimately be affected. David Hannah, principal consultant at Cornerstone Tax discusses what the outlook of the 2022 housing market is and whether house prices will continue to rise.
London’s Calling….. Perhaps no more
With the increased demand of people preferring to purchase a property in rural areas- 10% of Brits have moved away from a city or urban area and 24% of Brits have seriously considered moving out of the city to a more rural area due to the pandemic in the past year. It has meant that supply is becoming increasingly short in rural areas with bidding wars emerging, caused by the rush to move to houses with more space. Mixed with the disruption caused to the global supply chain continuing it means there are major issues facing the housing market going into 2022.
Many advisors think that the boom in the UK house prices is likely to end next year due to household finances becoming increasingly stretched, with raised interest rates and the end of the stamp duty holiday being major contributors to this. The increase in average house prices in the UK has increased by 8% this year and 6% in the previous year, however, growth is forecast to be broadly flat in 2022.
The average UK house price now sits at £272,992 – an increase of £34,000 since the start of the pandemic, but that growth is forecast to be between flat and 2% throughout 2022.
The continued persistency of employees working from home means that there will be an increasing amount of inner-city vacant office space. This brings an opportunity for those vacant spaces to be developed into homes. However, a dilemma is whether there will be enough demand for this increased supply. With research from Cornerstone Tax showing that 44% of brits feeling that the impact of Coronavirus has made city living less appealing it would suggest not.
David Hannah, principal consultant at Cornerstone Tax, discusses the outlook of the 2022 rural and city property market:
“There are still many uncertainties in the UK housing market as we head into 2022. One of the predominant problems being the current supply within the UK housing market, rural properties in the sub 2 and a half million bracket are in very, very short supply. Indeed, houses in the £200,000- £750,000 bracket in or on the edge of villages in the countryside are all being sold. This has caused estate agents to complain about the lack of stock.
“The disruption to the global supply chain (caused by the pandemic and the closure of the Suez Canal) continues. There is still a shortage of building materials. This has caused delays in the commencement and, indeed, the completion of many residential housing projects. Most new developments (particularly those outside cities) are already selling off plan, even with completion dates as late as May 2022 they are already being sold.
“This shows a sign of that increased and, I think, persistent tendency to want a property with gardens near open spaces and countryside. Demand for inner-city apartments has started to increase. Interestingly that may not be a post-pandemic effect, but rather a geo-economic effect.
“The tendency to work from home or work from anywhere appears to be persistent. With the consequent effect on commercial infrastructure the question has got to be: What is going to happen to all that vacant office space? – Is it going to be converted into new homes using permitted development?
Will this trend accelerate? It’s been very popular over the last few years as a way of regenerating urban centres, former warehousing, industrial, retail, hotels and offices and I think it will. This may on and of itself provide a further economic stimulus to this country
“The inbalance between supply and demand has, inevitably, raised the average UK house price, we saw a 0.9 increase in November, taking the average UK house price- which now stands at £272,992, to a new high. It is unclear whether the average UK house price will continue to climb throughout 2022, as we have seen in 2021.
“A solution to the global supply issues will cause an increased supply of new builds, providing the UK housing market with some much-needed extra stock, which should subsequently decrease the average UK house prices, but there are many obstacles facing the UK housing market now which has caused a lot of uncertainty”
