With 2021 coming to an end, growth in house prices continues to rise – showing an extraordinary 11.8% annual increase in 2021. The question is: Will it continue into 2022? There is hope that the housing market will continue to grow through 2022, but there are undoubtedly steps that need to be taken to achieve this. With a shortage of building materials, due to the massive disruption of the global supply chain, rising interest rates and the end of the stamp duty holiday, this means that the housing market will eventually be affected. David Hannah, chief consultant at Cornerstone Tax, discusses what the outlook for the housing market in 2022 is and whether house prices will continue to rise.
London’s Calling… .. Maybe not more
With the increasing demand from people who prefer to buy a property in rural areas – 10% of Britons have moved away from a city or an urban area and 24% of Britons have seriously considered moving out of the city to a more rural area due of the pandemic in the past year. This has meant that supply is becoming less and less in rural areas, where bidding wars are emerging, caused by the rush to move to houses with more space. Mixed with the continued disruption of the global supply chain, this means that there are major problems facing the housing market in 2022.
Many advisers believe that the boom in UK house prices is likely to end next year due to increasingly tight household finances, with higher interest rates and the end of the stamp duty holiday being significant contributors to this. The rise in average house prices in the UK has risen by 8% this year and 6% in the previous year, but growth is expected to be broadly flat in 2022.
The average house price in the UK is now £ 272,992 – an increase of £ 34,000 since the start of the pandemic, but that growth is expected to be between flat and 2% throughout 2022.
The continued persistence of employees working from home means that there will be an increasing amount of vacant office space in the inner city. This allows the vacant spaces to be developed for housing. One dilemma, however, is whether there will be enough demand for this increased supply. With research from the Cornerstone Tax showing that 44% of Britons feel that the impact of Coronavirus has made city life less attractive, this suggests that this is not the case.
David Hannah, chief consultant at Cornerstone Tax, discusses the outlook for the 2022 rural and urban property market:
“There are still many uncertainties in the UK housing market as we enter 2022. One of the predominant problems is the current supply in the UK housing market, and country houses in the class below 2, half a million are very, very deficient. In fact, houses in the class of £ 200,000- £ 750,000 in or on the outskirts of rural villages all sold.It has caused real estate agents to complain about the lack of stock.
“The disruption of the global supply chain (caused by the pandemic and the closure of the Suez Canal) continues. There is still a shortage of building materials. This has caused delays in the start and in fact the end of many housing projects. Most new developments ( especially those outside cities) are already selling according to plan, even with completion dates as late as May 2022, they are already being sold.
“This shows a sign of the increased and, I think, persistent tendency to want a property with gardens near open spaces and landscape. The demand for city apartments has started to increase. Interestingly, it may not be a post-pandemic effect, but rather a geoeconomic effect.
“The tendency to work from home or work from anywhere seems to be persistent. With the consequent effect on commercial infrastructure, the question must be: What should happen to all the vacant office space? – Should it be converted into new homes with permitted buildings?
Will this trend accelerate? It has been very popular in the last few years as a way to regenerate city centers, former warehouses, industry, retail, hotels and offices, and I think it will. This in itself can provide an additional economic stimulus to this country
“The imbalance between supply and demand has inevitably raised the average UK house price, we saw an increase of 0.9 in November, which takes the average UK house price – which now stands at £ 272,992 – to a new high. It is unclear whether it average UK house prices will continue to rise throughout 2022, as we have seen in 2021.
“A solution to the global supply problems will lead to an increase in the supply of new construction, giving the UK housing market some much-needed extra stock, which should subsequently lower average UK house prices, but there are many obstacles for the UK housing market now, which has created a lots of uncertainty ”