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Housing Price Index Update – January 2022

Posted by bigroarltd on February 28, 2022

With the unprecedented changes to the housing market caused by the events in 2020, it was difficult to predict the outlook of 2021. As we reached the end of 2021, some stability has returned to the UK housing market recovering from 2020. We can look at Zoopla’s forecast for 2022.

In the report, Zoopla notes “an ongoing re-evaluation of housing needs, increased housing equity and moves in parts of the labour force to more hybrid working” to be the main drivers in the property sector. A survey by Zoopla finds that in the next 18 months, 22% of households plan to move as a direct result of the pandemic. Of the people surveyed, young people who live in cities or those whose working patterns have changed (such as full-time remote work) were the most likely to make a move to suburbs or large towns.

Housing market price predictions

In 2022 it forecasts a rise of 3% to UK house prices, taking place across an estimated 1.2million housing transactions. As the UK still faces a low supply of housing, this environment will aid price inflation.

The high level of transactions during the stamp duty holiday in 2021 will not be repeated in 2022, creating a decline in activity in the same period during 2022 – this could be up to 20% less. Nevertheless, the market will still be at a historically strong level.

The Zoopla forecast also notes that mortgage lender competition will keep rates low, which could encourage more buyers next year. Also, there are still many markets in the UK that offer affordable housing.

North-west versus London

London price hikes continue to be the lowest in the country, with a forecast rise averaging around 2%. Whereas, in the northwest, the housing market has room to expand with an expected increase of 4% set to come in the next year.

In the report, it says: “We believe there is headroom for further, above average house price inflation in regions outside southern England. However, while affordability levels have improved by 10% in London since 2016, affordability remains well above the long run average – this will continue to limit level of price rises in the highest value areas of London and southern England in 2022 and beyond.”

Leading the way for the UK in September 2021 was Liverpool and Manchester, with annual house price rises of 10.4% and 8.7% respectively in Zoopla’s city index for house prices. Additionally, there is a price growth of more than 10% in the northwest towns such as Blackburn and Rochdale.

Are borrowing costs set to increase?

To secure low borrowing rates, buyers may need to purchase soon. Currently, at a record low of 0.1%, the Bank of England base rate is likely to rise in the coming year, creating a noticeable impact on mortgage rates. Although this will not impact how much buyers pay for homes, this could discourage new buyers. However, if you are an existing borrower, there will be some protection from the rate rises if you had secured a long-term fixed-rate contract.

By the end of 2022, Zoopla predicts rates will hit an average of 3%, which is still historically low, but would be the highest seen since 2015.

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