The property market for the year ahead

Everyone in the property industry wishes they had a crystal ball when it comes to predicting future markets. We can however make intelligent predictions based on past experience and lenders reports. So, what’s ahead for the property market in 2022?

Interest rates

The Bank of England raised interest rates in December for the first time since the beginning of the COVID-19 pandemic from 0.1% to 0.25%. This decision was based on data from the office of national statistics showed UK inflation hit a 10 year higher 5.1% in November. The price of petrol was a massive factor in this and it’s argued that there may be further interest rates rising in 2022 to quell inflation. Add in the end of government support measures and stretched household budgets, it’s fair to say house price growth is likely to slow. The data does not however suggest that there will be any drop, just a more usual sustained growth.

House prices

With average UK house prices at a new record high of £254,822 according to figures from Nationwide, the market seems to be thriving. The property market has shaken off potential threats from the end of furlough and stamp duty holiday and continued to do well right at the end of 2021. With the so-called race for space still on, people have not finished the changes in their life and the way they work in a post-pandemic world.

First time buyers

With no signs of prices dropping off the cliff edge, it remains increasingly difficult for first time buyers to get through on the property ladder. The gap seems to be widening in terms of affordability. Add in a shortage of housing at the lower end of the property scale and this could be challenging into 2022. There is one glimmer of hope in that the price growth is slowing which may provide some respite for first time buyers.

Mortgages

These will of course be impacted by the changes in interest rate. This base rate affects the cost of borrowing for mortgage lenders so this is likely to be passed on as a cost to the consumer. This is offset however by the fact that mortgages are very cheap at the back end of 2021 and therefore unlikely to soar on attainable levels. We will see an increase in the mortgage terms. Where wants a 25-year mortgage standard, we have seen 35-year mortgage is taken to stretch out before but ability over a longer period.

Supply and demand

The landscape has completely changed in terms of what is desirable now post covid. Whereas commuter links were paramount before, with some still working from home or even hybrid working patterns, buyers are more likely to prize fiber optic internet reach over a train station. This means houses in the country or by the sea with decent sized gardens are still massively desirable. When it comes to London however, there will still be businesses that expect staff to attend the office meaning properties on the commuter belt will be much sought after.