Despite lockdown restrictions and a global health crisis, the UK property market proved to be hugely resilient in 2021.
A Stamp Duty holiday, low interest rates, and a rush of homebuyers buying larger properties in less urban locations fuelled a house price boom last year, with most regions of the country showing double-digit house price growth.
Indeed, UK house prices grew at the fastest pace in 15 years over the three months to November 2021, with Halifax reporting that the average home was valued at £20,000 more than at the same time in 2020.
So, will this price growth continue in 2022, or will property values grow more steadily, or even fall, in the next 12 months?
A booming 2021 saw double-digit price rises
According to Halifax, UK house prices rose by 3.4% in the quarter to the end of November 2021, bringing the average price of a home to a record £272,992.
According to the lender, it was a shortage of properties on the market, a strong jobs market and competitive mortgage rates that all contributed to this rapid growth.
Property prices grew more steadily in London, but the average price of £521,129 is still much higher than the rest of the country.
The Land Registry’s UK House Price Index, which is based on sold property prices, also showed double-digit growth in 2021. Which? reports that the average price of a property in the UK rose by 10.2% year-on-year in October to reach £268,349.
One of the main drivers of this growth was the Stamp Duty holiday. Buyers were able to save up to £15,000 until 30 June, and then up to £2,500 if they completed by the end of September.
So now this tax break is over, could price growth dip in 2022?
Prices likely to grow in 2022, just not as fast
In the last few months there has been a great deal of optimism around the property market. This is partly due to an imbalance between supply and demand, with a shortage of properties on the market meaning homes are selling more quickly than ever before.
Which? reports research by Rightmove that found the average time to agree a sale in November 2021 was 38 days, one of the lowest figures registered since the start of the pandemic.
Despite the strong demand for homes, the median consensus among experts is that house prices will rise by a more modest 2% in 2022.
National estate agent Savills predicts prices will rise by 3.5% in 2022 and 3% in 2023, while the property portal Zoopla forecasts a 3% increase in 2022, with 1.2 million house purchases going through.
Halifax predicts a slower market, suggesting that prices could remain flat during the year, or grow by as little as 2%. “With the prospect that interest rates may rise further in 2022 to subdue rising inflation, and with government support measures phasing out, greater pressure on household budgets suggests house price growth will slow considerably,” said Russell Galley, the managing director of Halifax.
As Galley suggests, further interest rate rises could slow house price growth as mortgage borrowing becomes more expensive. The Bank of England increased the base rate to 0.25% in December, with further hikes to combat rising inflation likely to follow in 2022.
The Centre for Economics and Business Research (CEBR) revised its forecast for house price growth from 0.2% to 2% in November.
CEBR economist Karl Thompson says: “There is a heightened degree of uncertainty now that forecasts factor in expected increases in the bank rate, perhaps above 1%, given that rates have remained below this level for over a decade.”
A word of caution
Looking at the various predictions, the consensus is that house prices will continue to rise in 2022, albeit at a slower pace than they did in 2021.
However, house price forecasts are not always reliable. In June 2020 – after the first coronavirus wave – CEBR predicted that house prices would fall by 8.7% in 2020. They actually rose by 8.5%, according to the Office for National Statistics.
In September 2020, the CEBR predicted that property prices would drop by almost 14% in 2021. Meanwhile, in our blog this time last year, we reported that Savills expected house prices to remain stable across the UK in 2021, while Halifax expected UK property values to fall by between 2% and 5%.
Compare these forecasts to the actual outcome – more than 10% growth – and you can see why you should take any predictions with a pinch of salt.
Get in touch
If you’re looking to move home in 2022 and you need high quality, award-winning mortgage advice, please get in touch. Email [email protected] or call us on +44 (0) 20 3411 0079.
