The performance of the UK’s property market in 2021 was nothing short of remarkable. In the face of ongoing social and economic uncertainty due to the pandemic, house prices rose sharply and transactional volumes remained at the levels seen before Covid-19 emerged. No wonder that we ask ourselves if 2022 is a good year to buy a house in the UK.
According to data released by Halifax in the new year, the average price for a residential property in the UK now stands at £276,091, a rise of more than £24,500 on the year prior. This the greatest cash-value increase recorded since 2003.
Numerous factors contributed to the rapid growth of house prices, which can indicate if 2022 is a good year to buy a house in the UK. Four of these factors stand out as being the most pertinent to this recent swell of growth:
The first is the pent-up demand that formed during the multiple lockdowns and social distancing restrictions implemented throughout the pandemic. These periods, either entirely or in part, prevented or significantly obstructed people from purchasing properties. This resulted in a backlog of people – homebuyers and investors alike – keen to buy a property, and once the restrictions were lifted, the market burst back into life.
The stamp duty holiday between July 2020 and October 2021 was another key factor. It provided the opportunity for significant tax savings for property buyers – up to £15,000 during the first year of the initiative. This further fuelled demand, driving prices upwards.
Record-low interest rates of 0.1% between March 2020 and December 2021 meant that the cost of borrowing was relatively low. This aided would-be homebuyers.
Finally, the race-for-space: the pandemic has changed what people look for in a home, as research from Market Financial Solutions (MFS) in April 2021. Space is at a premium, which has led some homebuyers to sell their existing property and buy larger or more rural homes.
Together, these four factors contributed to a year like no other, with demand for property as high as it has ever been.
What is the house price forecast in 2022?
At the start of 2022, inquiries around whether the property market’s performance from the past 12 months can be sustained naturally started to surface:
- How many people are looking to get onto the property ladder, move home, or invest in real estate?
- What is motivating these decisions?
- What are the perceived challenges that stand in front of prospective property buyers?
To find the answers to these important questions, MFS commissioned an independent survey among 2,001 UK adults at the start of January 2022. The research provides a timely insight into how we can expect to see the property market evolve in the year to come and if 2022 is a good year to buy a house in UK.
The findings of the survey are outlined within this report, along with further insight from the MFS leadership team.
Here are some of the key findings:
After a busy year for the property market, our research shows there is unlikely to be any slowdown in 2022. In fact, it found that:
Naturally, not all who intend to buy a house in 2022 will move ahead and do so, yet the intentions are stark and underline the high demand which houses and flats will be subject to over the coming 12 months.
Of those who intend to buy a property (18%) in 2022, we found that over two fifths (43%) would be looking in a different area to where they currently live or own now. The rise of remote working, which has meant many people now commute to an office far less frequently, if at all, has been the catalyst for this trend, encouraging buyers to explore new options further afield.
Half (50%) of prospective buyers stated that they want a property that has more space, with the pandemic resulting in many people desiring more spacious properties. MFS’ aforementioned research from last year – The Homebuyer Wish List – which explored this trend in more detail. However, a major stumbling block stands in their way: two thirds (66%) of UK adults planning to buy a house in 2022 said they are worried that inflation and rising UK house prices will potentially push their desired property out of their reach.
In late 2021, UK inflation hit 5.1%, its highest level in a decade. It is expected to rise further to 6% in 2022, driven by energy regulator Ofgem changing its energy cap in the Spring.
House price predictions 2022
Evidently, there are fears around rising house prices among many would-be property buyers. This is understandable, given the significant increase in prices over the past 12 months – by most estimates, including data from the Office for National Statistics, residential properties jumped in value by approximately 10%.
We asked the 2,001 respondents about how they thought house price predictions would change over the course of 2022. Almost two thirds (63%) said they expect house prices to increase this year:
The confidence of the majority of the respondents to our survey is reflected in many experts’ house price predictions for 2022. For instance:
In light of the past and predicted house price growth, it is clear that many UK adults do not just aspire to get onto and move up the property ladder, but also to invest in bricks and mortar. Around a sixth (16%) of Britons aspire to develop a portfolio of buy-to-let properties.
Men (19%) being more likely than women (12%) to want to do this, as are younger people aged 18-34 where it increases massively to 34%.
Clearly, buy-to-let investment still holds significant appeal and will remain in high demand in 2022.
Sentiment towards the property market
As we enter 2022, one of the major outstanding questions concerns the long-term implications of the pandemic and what this could mean for the real estate sector as a whole. Did the developments from last year make 2022 a good year to buy a house? Indeed, our research found that 40% of UK adults feel the pandemic has changed what matters to them in a home – this is particularly true among those aged 18-34 (53%).
Interest rates remain another potential issue, along with the aforementioned concerns related to inflation and house price growth.
The Bank of England increased interest rates in December 2021, surprising many economists in doing so. The UK was the first major central bank to raise interest rates since the Covid-19 pandemic began.
Interest rates are predicted to rise further over the coming 12 months, owing largely to rising inflation noted earlier in this report. If this comes to pass, it will have implications on the cost of borrowing, most notably for those with (or hoping to acquire) residential mortgages and BTL mortgages.
Nevertheless, MFS’ research demonstrates the unwavering confidence that the UK public has in bricks and mortar. The desire to own a property, or develop an investment portfolio of them, is common among the majority of the population, which translates into significant demand that consistently outstrips supply.
2022 is poised to be another year of high activity and interest across the UK property market. Now, we must observe how the projected trends will materialise in reality.
The thoughts of our CEO
“After a frenetic year for the property market in 2021, in which house prices rose sharply, there has naturally been a great deal of speculation as to how 2022 will unfold. Our new research shows we should not expect any sudden slowdown; the fact that 18% of UK adults – over 9 million people – intend to buy a property in the coming 12 months shows that demand remains sky high.
Yet our research also underlines the challenges that stand in front of prospective buyers. The so-called ‘race for space’ means that competition for certain properties – such as houses with gardens and spare rooms for home offices – will be fierce. Meanwhile, rising inflation, the potential for further interest rates hikes, and delays in securing mortgages, could also act as stumbling blocks for those looking to buy property.
Forward planning will be crucial for anyone looking to buy a new home or invest in property. Having their finances in order and, if required, a lender in place will ensure they can act with speed and confidence, which will improve their chances of being successful in a competitive market.
As underlined in our research, we expect demand for buy-to-let investments to remain high throughout 2022, which is why we’re building on our existing bridging loan offering with a new range of Buy-To-Let Mortgages. Ultimately, property buyers and the brokers they rely upon need lenders to act with speed, flexibility and, at times, creativity.
Throughout the year to come, MFS will be on hand to assist property buyers and investors overcome many potential challenges. Buying at auction, counteracting broken chains, lenders pulling out, refurbishments and renovations, refinance – we have the experience and expertise to assist in a wide range of cases, no matter how complex, even if a large loan is required.
MFS is expecting a busy, productive 2022. We look forward to working closely with brokers and their clients to deliver the best possible products – be it a Bridging Loan or a Buy-To-Let Mortgage – and doing so without any undue delay.”
Paresh Raja, CEO, MFS