2021 has been an unprecedented year for the UK property market. A lack of properties coming onto the market, along with the government’s stamp duty holiday, created a property market boom that saw the average UK house price reach a record high of £265,000.
So, what will 2022 hold for the property market? Predictions for the year ahead are conflicted. Some say current levels of growth are unsustainable and are expecting a market crash, whilst others are suggesting the continued lack of stock will see prices continue to climb. Danny Luke, managing director of the UK’s largest home buying company, Quick Move Now, gives us his thoughts on the biggest challenges movers are likely to face in 2022.
There is little doubt that the last 18 months have presented some unique challenges and opportunities for the property market. Government measures kept the market crash that many predicted away, but what will happen over the next 12 months, now that those measures have ended? Will we see prices continue to rise or will rising inflation and interest rates instigate a correction?
Rising interest rates
Interest rates are currently at an all time low. The Bank of England’s base rate remains at a historic low of 0.1%, which means, at the moment, mortgages are also exceptionally low and therefore affordable. However, with inflation rates continuing to rise, it is only a matter or time before we see interest rates climb as well. Rising interest rates will make borrowing more expensive and also make mortgages more difficult to secure, as borrowers find it harder to meet lender affordability criteria and pass stress testing.
Lack of stock
If the current problem with lack of properties available continues, it could cause real problems for the UK property market. Without an increase in the number of properties coming to market, things will eventually grind to a halt. Without desirable properties available to move to, homeowners without a strong need to sell (eg. relocating, downsizing due to financial difficulty etc) will put off moving until the market picks up.
The property market cannot continue the way it is. Prices are continuing to rise month-on-month, yet wages are largely stagnating. Prices cannot rise much further as buyers simply will not be able to afford the prices being asked. The hope is that once the market reaches its peak, we will see a ‘stabilising’ or soft price correction. The fear is that if prices continue to risk too much more, the correction will be more of a sharp shock to the market with a significant drop in property values.