2021 has truly been a spectacular year for the property market, having been the busiest year since 2007.
Despite the Bank of England warning that property prices had the potential to fall 16% due to the pandemic, the average UK house price rose £15,500 in 2021, with Wales seeing the largest increase at 10.8%. Zoopla reported that the increase in price was particularly caused by the demand for properties.
The property market demand during 2021 was likely prompted by the COVID-19 pandemic and the three lockdowns that followed it. With people having plenty of time stuck at home reflecting on their personal lives, including their home, it isn’t a surprise that so many decided to make a change.
Other factors including lack of supply, desire for more space and rural living, lower mortgage rates, and the stamp duty holiday all contributed to a surge in demand, prompting prices to go sky high.
By the end of December this year, Zoopla claims that one in 16 homes will have changed hands.
There is no precise answer for what the property market will look like in 2022, as it’s currently an unknown territory. Whether things will return to the normal pre-pandemic level or stay as busy as they have for the past year, only time will tell. That said, there are some predictions that can be made.
Mortgage prices are expected to rise
Current mortgage rates are near an all-time low, with many property owners having been fortunate enough to find excellent rates on their mortgages, but many professionals analysing the market expect a surge, particularly as we are facing a jump in UK inflation, with the rate currently sitting at a 10-year high of 5.1%.
On the 16th of December, The Bank of England raised its base rate from 0.1% to 0.25%, the first rise since the pandemic hit. Despite this currently still being an extremely low rate, it acts as an indication that the base rate could rise further, with this having a direct knock-on effect for mortgage rates.
Property demand could dip
There are many reasons why we may see a dip in demand for homes in 2022 in comparison to the 2021 property purchase surge. With Stamp Duty Land Tax holiday having ended and the expected rise in mortgage interest prices, it is possible many property owners will choose to stick with their current homes to avoid any unnecessary additional costs.
The Stamp Duty Land Tax holiday was one significant reason for both the increased demand in properties and the growth in market prices, providing people with the opportunity to save up to £15,000 on the cost of buying a new home.
For those who were already looking to purchase a home, the Stamp Duty holiday was a strong incentive not to delay, with many people rushing to complete before the holiday ended. However, with the Stamp Duty Land Tax holiday no longer applying, it might be that many people decide that moving home isn’t a necessity or something that they can afford to do with the additional costs on top. It may also simply mean that people take more time over buying a home, spreading out the same number of transactions over a longer period.
As we spoke about above, it is expected that we will see an increase in mortgage rates following the rise in the base rate. People who already have a mortgage in place on fixed terms are unlikely to want to purchase new homes as the interest they will pay could be significantly more in comparison.
Due to these two factors, it is likely that the property market can expect to see a dip in demand over the coming year.
Property prices could decrease
If demand for property decreases, sellers will be in a weaker position, while rising mortgage rates may cause buyers to be more cautious about how much they can spend. Combined with higher costs due to the Stamp Duty holiday having ended, it is likely property prices will increase at a slower rate, flatline or even decrease in 2022.
Will there be a demand for larger properties following the pandemic?
Plenty changed as a result of the COVID-19 pandemic, including the property market. Demand for extra space soared, especially for those working from home and with children who needed space for remote learning.
While the majority of the population are now vaccinated, we are still being faced with new variants of the disease and a further need for additional booster vaccinations. This has meant many companies are sticking to the remote working culture, with a growing trend for flexible working across a wide range of industries.
Therefore, it can be expected that the demand for larger properties is expected to continue, although perhaps not at quite the same rate as during the peak of the pandemic.
Can we expect demand for properties with outdoor areas?
Demand for properties with outdoor space has also surged during the pandemic and there is the potential for this to continue, especially with recent times seeing an increase in COVID-19 cases due to the Omicron variant and concerns about future variants and their impact.
Many Brits spent months stuck inside their homes during one of Britain’s hottest summers. A high number of those people did not have their own personal garden, forcing them to spend long periods indoors. Many of those affected by lack of space during the first lockdown admitted that they would prefer to live in a house with a garden or outdoor space.
Whether further lockdowns will happen and what impact this will have on demand for outdoor space is impossible to predict, but it certainly can’t be ruled out.
Get in touch with our conveyancing solicitors
If you are planning to purchase, sell or remortgage your home in 2022, our friendly conveyancing solicitors can provide the assistance you need for a smooth transaction. Get in touch with our conveyancing solicitors by giving us a call or getting a quote online.