In May 2020, the Bank of England feared that property prices would fall because of the pandemic, but in fact, the sector not only survived but thrived. In January 2022, the average house price jumped to £276,759 which is a record high.[1] Rightmove recorded a price increase of 7.6% in January 2022 compared to January 2021.[2]
Property experts think the buoyancy of the housing market post-lockdown was due to pent up demand, a limited supply of houses, people’s desire to have more space at home and to ‘escape to the country’, low mortgage interest rates and the stamp duty holiday.
As we move into spring 2022, our world is changing by the day. Here we talk about what the property market looks like in 2022 in light of UK and world events.
What is predicted to happen to house prices in 2022?
It is expected that the housing market will cool this year due to a range of factors. The stamp duty holiday has ended, fewer mortgages are being agreed and there is a cost-of-living crisis that will be worsened by the Russia-Ukraine war.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown is expecting house prices to die down in 2022, after reaching record levels last year. She predicts that house prices will slow rather than dramatically fall.[3] Her predictions are echoed by Russell Galley, Managing Director at Halifax. He believes house price growth will probably remain broadly flat in 2022, but he acknowledges there is a degree of uncertainty around this.[4]
The housing market may slow down earlier in 2022 than many experts previously thought due to the Russia-Ukraine war as the Bank of England could now increase interest rates. When interest rates rise, mortgages become more expensive, which leads to decreased demand for property and so the housing market cools.
However, the Bank of England may be reluctant to hike interest rates due to fears this could exacerbate an economic downturn which will be counterproductive.[5]
Will house prices rise in the long-term?
The estate agent Savills predicted that house prices will grow 11% or 12% between 2022 and 2025. Their prediction was based on the Bank of England increasing interest rates to no more than 0.5% in 2025.[6]
However, the market now predicts that the Bank of England base rate will be over 2%, and perhaps as much as 2.3%, by February 2023.[7] What will happen beyond 2023 remains uncertain.
In the long-term house prices in the UK tend to rise, even though economic recessions mean there are periods when prices slump. The time it takes to recover after these dips varies between regions of the country.
Are there regional variations in house price increases?
The northeast of England recorded a record growth of 13.3% in property prices in August 2021.[8] The East of England, South East and South West saw prices rise by over £20,000 over the course of a year.[9]
Areas that saw the slowest growth in 2021 were London and Scotland. Prices in London rose by 5.3%, whilst those in Scotland rose by 2.4%. This compares to a rise of 7.1% in the rest of the UK.
If you are considering buying a property in 2022 it is worth researching the property prices in your area to find out how they have performed recently and how they are likely to perform over time.
Is now a good time to get a mortgage?
There are still attractive mortgage deals available on the market, although not as many as there were a few months ago. The best mortgage deals, as always, are available to those with the largest deposits. Banks are currently offering more high-loan-to-value mortgages to help people to buy properties.
Before taking out a mortgage it is a good idea to speak to a mortgage advisor as they have access to a range of mortgage deals that are not available on the high street.
When you talk to a mortgage advisor it is worth considering fixing the rate of your mortgage while interest rates are relatively low. In the past, people on variable rate mortgages had the option to change to a fixed mortgage deal if they saw interest rates creeping up. However, more stringent affordability rules mean that re-mortgaging in this way is now much harder.[10]
Is it cheaper to rent than buy?
In January 2022, rent prices reached a record high[11], so many people were paying more per month than those with mortgages. The average rent is now £1,064 per month (£1,760 in London)[12] compared to £700[13] for the average monthly mortgage repayment.
If you are considering buying a property it is a good idea to search property portals to compare the price of rent in your area to your predicted monthly mortgage repayments.
When you rent a property, you do not have to worry about interest rate rises. However, there are significant advantages to owning your own property. You can make your own decisions about decorating without having to ask permission and you do not need to worry about a landlord selling your home.
When you buy a property, you should think of it as your home, but it is also an investment. If prices have increased by the time you sell your property, the money is yours rather than a landlord’s.
Reasonable mortgage deals are still available while the Bank of England interest rate remains low. Depending upon your circumstances it could make sense to secure a good deal while it is still available.
Are you joining the property market in 2022?
If you are planning to buy a property in 2022, our experienced Conveyancing Solicitors can help you. We can make sure your transaction runs as quickly and smoothly as possible, whilst always being available to answer your questions.
We offer a fixed-fee with no hidden extras making it is easy for you to set your budget. Our team are part of the Law Society’s Conveyancing Quality Scheme, so you can rest assured we are highly skilled and focused on client care.
Please call 02920 093 600 to talk to one of our Property Solicitors today.
[1] The Times, Is now a good time to buy a house? https://www.thetimes.co.uk/money-mentor/article/good-time-buy-a-house/
[2] Express, House prices boost: Why UK house sales have jumped in January, https://www.express.co.uk/life-style/property/1552351/house-prices-january-increase-uk-evg
[3] The Times, Is now a good time to buy a house? https://www.thetimes.co.uk/money-mentor/article/good-time-buy-a-house/
[4] The Times, Is now a good time to buy a house? https://www.thetimes.co.uk/money-mentor/article/good-time-buy-a-house/
[5] This is Money, Interest rate headache for Bank of England as Ukraine invasion throws March hike into doubt, https://www.thisismoney.co.uk/money/markets/article-10548907/Rate-headache-Bank-Ukraine-war-throws-future-hikes-doubt.html
[6] The Times, Will house prices drop in the next five years? https://www.thetimes.co.uk/money-mentor/article/will-house-prices-drop/
[7] Money to the Masses, When will interest rates rise (or in fact be cut)? – Latest predictions, https://moneytothemasses.com/owning-a-home/interest-rate-forecasts/latest-interest-rate-predictions-when-will-rates-rise
[8] The Times, Will house prices drop in the next five years? https://www.thetimes.co.uk/money-mentor/article/will-house-prices-drop/
[9] This is Money, Four British regions saw house prices rise more in 2021 than in the previous two years combined – but property market is tipped to ‘normalise’ in 2022, https://www.thisismoney.co.uk/money/mortgageshome/article-10328707/The-four-UK-regions-house-prices-grew-2021.html
[10] Money to the Masses, When will interest rates rise (or in fact be cut)? – Latest predictions, https://moneytothemasses.com/owning-a-home/interest-rate-forecasts/latest-interest-rate-predictions-when-will-rates-rise
[11] The Times, Should I rent or buy a house? https://www.thetimes.co.uk/money-mentor/article/rent-buy-which-best/
[12] HomeLet Rental Index, https://homelet.co.uk/homelet-rental-index
[13] Boon Brokers, How much does the average mortgage cost? https://www.boonbrokers.co.uk/how-much-does-the-average-mortgage-cost/#:~:text=Average%20mortgage%20cost%20(including%20interest)&text=Furthermore%2C%20the%20current%20average%20mortgage,the%20UK%20is%2020%20years.