UK Real Estate Market Trends And Forecasts For 2022

UK Real Estate Market Trends And Forecasts For 2022

Property specialists at 1newhomes gather and explain current real estate trends and property forecasts for the UK market in 2022 with house prices, demand, and market settings for different buyers.

The current year might be a record year regarding sales: the total amount of house deals could reach 1.5 million. Based on the recent market data and the figures by Office for National Statistics (ONS), estate specialists gather property forecasts for 2022.

The past 18 months saw busy property market buoyancy during the pandemic with changing work, life, and property priorities of people across the UK. 

Some believe that the implementation of the Stamp Duty Holiday triggered the heated activity, which might be the case. But the tax relief ended on 1 October this year, and the demand sustained: it is now 30% higher than the 5-year average. The tax relief ended gradually, without rapid changes in the property market, which still experiences a pandemic-related boom.

Current property market trends

  • Approximately 1.5 million home deals are expected to be completed in 2021. It will be a record-high year in terms of market activity since 2007.
  • Currently, 22% of people want to switch their flats or houses. This figure sharply contrasts with the ordinary levels in normal market settings: 5%.
  • From September 2020 to September 2021, the house price growth stood at 6.6%. But the pace is forecasted to slow down to 3% in the coming year of 2022.

2021 might become a record year since 2007 in terms of house transactions: the number could reach 1.5 million deals this year. 

The combination of changing work-life priorities, low mortgage interest rates, and the introduction of the Stamp Duty Tax relief have all triggered and boosted the demand to new heights.

The total value of homes sold in 2021 tends towards £473 billion (bn). It means a £95bn increase against the challenging year of 2020. However, the heated activity might cool down as the property market in the UK faces new obstacles.

Recent property price growth

As of late September this year, the annual house price growth stood at 6.6%. But the figure varies significantly across regional markets.

Generally, areas with affordable properties tend to see greater price growth levels. Houses in Wales became 10.4% more expensive over a year, while homes in North West and Northern Ireland also outperformed other regions with 8.8% and 8.3% growth accordingly.

On a city level, the Northern regions likewise performed better in terms of the house price growth. Liverpool, Manchester, and Sheffield ranked the top three cities where property values increased by 10.4%, 8.7%, and 7.8% respectively. The only location with a negative annual house price growth was Aberdeen, where homes became 0.3% cheaper over a year.

Not surprisingly, London house price growth lagged behind the other UK regions. An average property in the capital is worth more than 11 times the average salary and increased by only 2.3% over a year. Additionally, London became the only area with growth levels below the 5-year average.

Current market settings for first-time buyers

Since summer 2021, the demand from first-time property buyers (FTB) has been above 30% of the 5-year average levels. Current market trends indicate the FTB demand remaining high in the following weeks and into the next year.

However, the profile of a typical buyer has changed. After the first lockdown last year, top-league homeowners dominated the market with premium properties. The low mortgage interest rate in 2021 brought more first-time buyers into the market, returning the mix of movers to more ordinary levels.

But the insufficient stock in the property market cannot meet the increased demand. The recent market data shows the number of properties for sale 38% below the 5-year average. Real estate specialists expect the misbalance of demand and supply to continue putting upward pressure on property values.

UK real estate forecasts for 2022

Moving into next year, property specialists expect both optimistic and pessimistic trends to influence the housing market.

One of the positive signs is the pandemic-related continuing race for spacious properties that will remain in 2022. 

Many workers discovered the benefits of remote work that, in turn, opened new perspectives for many of them. The market data reveals that 22% of people desire to move – it sharply contrasts with just 5% in the normal market settings.

Additionally, a lot of homeowners benefitted from rising property values over the past 18 months. And insufficient supply in the market will continue to heat the house prices next year. However, London developers try to balance out the supply and demand – they offer many new developments in London right now.

As for the downside, the increasing living costs and potentially rising mortgage and tax rates in 2022 will affect affordable housing.

By the end of 2022, the house price growth is expected to stand at 3%, with East Midlands and North West areas outperforming other regions. The weakest numbers next year are forecasted in London.

The number of deals is likewise likely to fall. It will reach 1.2m transactions, meaning a 20% decrease. However, the figure is in line with the recent average and relatively high against the past decade.

Property expert Richard Donnell expects a further pandemic impact on the property market but at «a less frenetic pace». The market dynamics are likely to outweigh some of the emerging downsides, such as increasing costs of living and higher mortgage rates.

Donnell adds that the recent data indicates a «turning point» for the house price growth rates, which are expected to slow down and reach 3% by the end of next year.

Key takeaways for first-time-buyers

  • The market has gained momentum and is not expected to ease until well into 2022.
  • Thus, first-time property buyers need to act swiftly should they find an attractive offer. It might be sensible to have a mortgage agreement in principle in advance of the house searching.
  • As the demand for spacious houses and gardens is still strong, first-timers might benefit from considering flats offers.  For example, there are many attractive 1-bedroom London flats for sale right now.

Key takeaways for home-movers

  • Those looking to sell properties and move might find current market settings favourable: the insufficient supply cannot meet the heated demand right now.
  • However, the very same trend might make it challenging to find a new home too. Prospective buyers might need to analyse the market dynamics before selling: talk to estate agents or look through the latest London neighbourhood guides to find opportunities.
  • In case of rapid market momentum, home-movers may want to consider having an accepted property offer before selling their own.

Overall, current and future market trends seem to be more positive than negative. The heated activity is to stay but might ease as we head well into next year.

Both ambitious FTBs and savvy home-movers will benefit from gaining new insights into the property market. For example, there is a wide selection of London new-build homes of various sizes and buying options for savvy buyers looking for housing in the capital.


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