UK house prices were 10.4% higher in December 2021 than in December 2020, according to figures from Nationwide. The building society’s House Price Index revealed that 2021 was the strongest year for house price growth since 2006. The average house price hit £254,822, representing a £24,000 increase in the past year.
With prices sky-high, is now a good time to buy a house in the UK? Or should you wait until the property market slows and prices drop? Will they fall and if so, when?
In this blog, we’ll help you assess the current housing market and weigh up the pros and cons of buying in the near future.
The Current UK Housing Market
House sales and prices hit a record high in 2021, spurred on by increased buyer demand after the end of the first COVID-induced lockdown in May and the stamp duty land tax holiday that ran from 8 July 2020 to 30 September 2021.
Many people began spending more time at home for work and leisure, leading them to reassess their lifestyle and housing needs. As a result, homeowners decided to sell up and move in record numbers. In particular, demand was for larger properties located outside of cities with fast wi-fi, gardens and access to public green spaces — the so-called “Race for Space”.
Despite repeated predictions of the market slowing, sales remained strong throughout the year. There was a December dip in asking prices, but this is consistent with previous years and the market still ended on a high, with prices 10.4% higher than in December 2020. The property portal Rightmove reported that more properties than ever before were marked as sold subject to conditions — seven out of 10 properties compared to just two out of ten in 2012.
However, the average property price has not risen at the same rate across the country. Wales leads the way with a 15.8% price rise to £196,759, compared to London where the average price rose just 4.2% to £507,230. Overall, the South East, South West, East of England and North West saw the biggest increase in property prices.
There have also been fluctuations in demand for different types of property. In the first half of the year, larger family homes were selling faster and for more money than smaller homes, with flats being the hardest to sell. But in December, there was a rise in demand for flats and a drop in searches for houses as people began returning to offices and resuming their “normal” way of life.
2022 has begun with a buoyant housing market. Buyer demands remain strong and house prices remain high. But is it all about to change?
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Will House Prices Drop in 2022?
With the uncertainties of COVID-19 and new variants such as Omicron, it’s almost impossible to forecast how the UK housing market will change in 2022. And let’s not forget Brexit, which continues to impact the economy in unexpected ways.
However, property professionals expect the market to remain busy but “less frenetic” than it was in 2020-2021 as the number of buyers and sellers begins to level out. The market will remain strong, but house price growth will slow and may revert to pre-pandemic levels.
Buyer Demand. In December, the Bank of England raised interest rates for the first time in more than three years. This is likely to quell buyer demand, which in turn will help to stabilise prices. In addition, the stamp duty holiday, which helped to push property prices sky-high last year, ended in September, so it will not be a driving force for buyers in 2022. There are moves to relax the rules around mortgage lending to keep the market moving amidst the uncertainty of Omicron, but buyer demand looks set to become less manic in the year ahead.
Seller Motivation. The typical New Year rush, when people look to make a new start by putting their home up for sale, will see more homes come on to the market in January, but this will level off by the end of the month. While property prices remain high, there will be a steady flow of new homes to the market, although some homeowners may remain cautious about selling during such uncertain times.
Property Prices. As the above factors come into play and the pressure on household budgets increases throughout the first quarter of the year — due to inflation, rising household energy costs and the ongoing uncertainty caused by the coronavirus pandemic — the rate at which house prices have been rising will almost certainly ease. However, there are currently no strong indications that prices will fall. In fact, most house price indexes predict a small increase — up to 5% — over the course of the year.
Due primarily to the pandemic and its impact on the economy and household finances, the outlook for the UK housing market in 2022 remains uncertain.
Is it Easy to Get Approved for a Mortgage in 2022?
Unless you have the funds to buy a new home for cash, being able to get the mortgage you need will be a deciding factor in whether or not now is a good time to buy.
Last year, buyers were spoilt for choice with mortgage deals. The number of mortgages available between October 2020 and February 2021 rose 42%, according to data released by Which? And there was good news for first-time buyers as 90% mortgages were reintroduced by several lenders, making it easier to get a foot on the property ladder. The 40-year mortgage also reappeared and lending rules were eased across the board, with some mortgage providers moving towards a more generous loan to income multiple.
However, rising interest rates will make it harder and more expensive for buyers to secure the loan they need. And not all lenders have become more lenient. Buyers may still have hurdles to overcome to secure their preferred loan terms and the best mortgage deals. For example, steep up-front fees often put the most attractive offers out of reach for buyers without ready cash.
The Bank of England’s recent announcement that it plans to relax mortgage affordability rules is perhaps a promising indication that moves will be made to facilitate home buyers and keep the housing market moving despite the uncertainties wrought by COVID-19.
Is it a Good Time to Sell a House?
If you’re not a cash buyer and you need to sell your current home before you can buy another one, what can you expect in 2022?
There is no expectation that there will be a significant drop in house prices this year. Things can change rapidly, but based on current housing market forecasts, this could be as good as it gets in terms of sale prices. If prices do remain fairly static in the coming months, there’s no hurry to sell (unless you have another pressing need to move, such as divorce or relocating for work).
That said, the uncertain nature of the market might be enough to nudge you into action. As inflation and interest rates rise, the cost of living will increase too — 2022 is already being called the “year of the squeeze”. According to The Resolution Foundation, an independent think-tank on improving living standards, the rise in energy prices, higher National Insurance contributions (from April 2022) and inflation will push many households beyond their means. Throw into this mix the ongoing disruption and uncertainty caused by the pandemic, and we could see house prices slump later in the year.
The truth is, nobody can predict how much your house will be worth in August compared to January 2022. December saw a dip in asking prices and buyer demand. This could be a standard seasonal trend or a sign that the pool of buyers is diminishing and less competition will drive prices down.
If you’re eager to get the New Year off to an exciting start by putting a winning offer in on a new home, we can help you to sell your existing house fast. Avoid the hassle, delays and stress of a traditional on-market sale with an estate agent. House Buyer Bureau can offer you a guaranteed sale, which will make you a much more attractive prospect to the seller of your dream home.