Room for growth: UK housing market will continue ‘its upward climb’
Residential property prices ended 2021 at a record high with annual growth at its strongest in 15 years, and yet there appears to be plenty more room for growth in 2022.
The average price of a home hit £254,822, an increase of almost £24,000 compared to the previous year, according to Nationwide. In cash terms it is the largest yearly rise on record.
Prices rose by 10.4% in the 12 months to December, up from 10% in November, owed in part to the low supply of homes on the market.
Average prices hit a year-high of £254,822 in December, marking a £23,902 rise on the same month last year, while they were 1% higher month-on-month.
“Prices are now 16% higher than before the pandemic struck in early 2020,” said Nationwide chief economist Robert Gardner.
Wales was the strongest performing region, with house prices up by almost 16% year-on-year. London recorded the weakest rate of growth at 4.2%.
The South West was the strongest performing English region, with annual price growth of 11.5%, the largest calendar-year increase in the region since 2004.
Iain McKenzie
Industry reaction to the latest Nationwide House Price Index: :
Iain McKenzie, CEO of The Guild of Property Professionals, said: “The property market ended 2021 on a high, and it’s incredible to think that average house prices have soared almost £24,000 this year.
“This was the year that Britons took stock and decided it was time to find their dream home, and the trend shows no signs of slowing.
“Mortgage approvals are still well above pre-Covid levels, and with demand outstripping supply, prices are still being pushed up.
“We expect 2022 to start the same way, with fears over the Omicron starting to subside. Buyers will have one eye on soaring inflation, but the housing market continues its upward climb.”
Nicky Stevenson, managing director at Fine & Country, commented: “To close out the year at an all-time high on a wave of double digit annual growth sums up what has been an unstoppable rally that has surprised at every turn.
Nicky Stevenson
“Earlier this year, the performance of house prices was being described as a ‘mini-boom’ but the market has substantially outgrown that moniker now. The rally still hasn’t run out of steam, with buyers in December shrugging off the rise of Omicron and a rise in central bank interest rates.
“There are two main headwinds on the horizon, as Covid fears begin to ease. The first is inflation and the unpredictable pace at which the Bank of England will raise rates. Given property transactions are relatively slow affairs, this is one of the more difficult nettles to grasp for buyers who are stretching their budgets and trying to plan ahead. This affects those buying at the top end of the market as much as it does first-time buyers.
“The second is consumer confidence. In the shadow of Covid, the UK has dodged an economic day of reckoning so far, largely thanks to government support, but there’s plenty of uncertainty left to navigate in 2022 from employment prospects and wage inflation to new Covid variants and rises in the cost of living.”
Lucy Pendleton, at estate agents James Pendleton, said: “December has capped off an extraordinary year that will go down as one of the market’s outliers. All parts of the economy seemed to be on manoeuvres in 2021.
Lucy Pendleton
“It was the year that policymakers kept pouring fuel on a fire that was already raging, London’s bellwether housing market consistently trailed the rest of the country and first-time buyers refused to lose interest despite soaring prices.
“You almost never see these three trends together but nothing surprises us anymore. It was very difficult to foresee any of this.
“For starters, the pandemic caused the so-called ‘race for space’ which was impossible to predict. Its legacy was that many buyers never got to enjoy the stamp duty discount because prices rose so fast that house price appreciation quickly eclipsed the tax break.
“It’s unlikely, armed with hindsight, that the government would intervene in this way and on that scale if it had its time again.
“Strong inflation would normally prompt an exodus of first-time buyers, particularly as interest rates would normally be on the march as well. That didn’t happen. The cost of borrowing remained mercifully low while the price of everything else took off.
“This delicate status quo can’t last forever and that’s what experts are watching as we head into 2022. New blood is crucial to the housing market and if December’s interest rate hike by the Bank of England indicates the direction of travel, wage increases may not be enough to counteract higher rates next year.
“Consolidation has to be on the cards but weaker performing regions like London could buck the national trend. Weaker affordability on average has held the capital back in terms of annual growth this year but wage increases and returning interest from international buyers next year could turn that trend around.”
Source: https://propertyindustryeye.com/room-for-growth-uk-housing-market-will-continue-its-upward-climb/