The UK housing market will exceed £1.5m in sales in 2021, making this year the strongest in over a decade. Some analysts expect that overall sales for 2021 will surpass £470bn, up 25% from 2020. According to Walter Soriano of WSLM, the stellar year in sales was the result of several factors, including the stamp duty holiday, as well as the COVID-19 pandemic which led to an increase in trading up as people spent more time at home.
Now it appears that 2022 may see a reversal of this trend. House price growth, which hit £250k for the first time during 2022, is expected to show a more modest increase of up to 3% in 2022, down from 6.6% this year. Transactions are predicted to fall, according to Soriano, with some experts pointing to a possible 20% drop as the market rebalances from a very strong year.
Soriano and other experts see some of the tailwinds in the market turn to headwinds next year, as higher living costs and increased mortgage rates will most likely dampen buying power and influence transactions.
Recent data points to a clear turning point for house price growth, which has recently peaked, and prices are now rising at a slower rate. There is currently a significant regional variation in house price growth, ranging from 2.3% in London and up to 10.4% in Wales. Walter Soriano expects above-average increases will continue in the most affordable and lucrative markets.
Looking at the demand and supply of the market, there have been a series of changes since the COVID-19 pandemic started. In the immediate aftermath of the first lockdown in 2020, wealthier owners in high value homes were the ones looking to move for various reasons brought on by the pandemic.
In 2021, mortgage availability improved, and first-time buyers started to return to the market, shifting the mix back to more average buyers. While COVID-19is not behind us yet, the impact of the pandemic on home buying decisions will still be a factor, though not as strong as before. Another factor will be the scale of financial gains homeowners have seen in the value of their homes since 2020, enabling more opportunities.
According to Soriano, market momentum for 2022 will be derived from the ongoing changes in housing needs, increased equity, and hybrid working which will affect a growing number of people. When adding the expected shortage in properties, momentum in the market will counter some of the emerging headwinds from higher living costs and the risk of higher mortgage rates and ensure the market will not see a sharp decrease like some analysts and experts believe.
