The events of 2021 resulted in many unexpected shifts in the housing market. Following a year of booming property prices underpinned by economic recovery, ultra-low mortgage rates, stamp duty incentives and pent-up demand for property, there was soaring demand for new homes in the UK.
The increased number of potential buyers compared to available properties led to strong competition, causing the price of a typical home to skyrocket. Data shows that nearly one-third of all homes in England were sold for more than their asking price. However, is this trend set to continue in 2022?
Why Did House Prices Rise So Much in 2021?
The housing market defied all odds in 2021, reaching record highs. The dramatic increase in the price of houses was largely due to the COVID-19 pandemic which drove a desire for more space as a result of work-from-home restrictions.
There was also pent up demand, a limited supply of houses and low mortgage rates causing house prices to rapidly increase during this 18 month period. This alone, led to many people getting property valuations online and offline, faster than ever before, with an eye to sell and meant a lot more people were looking for a quick sale of their home when prices were good. Moreover, the UK’s Stamp Duty holiday that was introduced to reinvigorate the housing market meant that more people than ever were able to access the housing market to buy a property or house for potentially significantly cheaper.
A Return to a Traditional Housing Market
If 2021 is anything to go by, 2022 is forecast to be a good year for selling your home. Whether you need you sell a house fast or on the open market, 2022 does look set to be a good year to sell a property in the UK. Experts have predicted that many of the trends witnessed in 2021 will be carried forward into 2022, with the cost of houses pushed up by the pandemic continuing as a trend in housing for a further period of time.
While house prices are likely to maintain around their current high levels, the sky high growth in prices will be difficult to replicate in 2022. According to Rightmove, following a frenzied 18 months, the market is likely to encounter a less frenetic period with a more even balance between buyers and sellers.
Rightmove, as well as other experts, have predicted a return to a more traditional market, predicting that the growth of the housing market will be minimal during 2022- between 0-2%; but they are not expecting a dramatic slowdown.
They have forecast that the price of homes will rise by around 5% on a national level in the upcoming year and it is expected that the momentum between buyer demand and the market will remain strong. Therefore, if you do decide to sell your property in 2022, the chances of finding a potential buyer are very high.
Factors Contributing to the Slowing Down of the UK Housing Market
The housing market has defied expectations and has continued to rise into 2022, albeit at a slower pace. However, many potential variables could push house prices either way, and impact whether the current year is the best time to sell your home.
Stamp Duty – The significant increase in rising property prices in the previous year can be largely credited to the stamp duty holiday. Announced by the government in July 2020, the stamp duty holiday led to an unprecedented surge in demand for homes. Many buyers purchased properties during this period to benefit from the holiday thereby fuelling a significant price increase in the market.
However, since it came to an end in September 2021, price growth has slowed and the trend is set to continue; but demand levels are nevertheless expected to remain high compared to recent years.
Rising Interest Rates – The prospect of rising interest rates from their record lows could also exert a cooling influence on the housing market and is expected to considerably slow house price growth. A significant drive for house price increases in 2021 was the availability of cheap mortgages.
However, following the Bank of England’s decision to increase interest rates, and their indication of further possible increases in the coming months, there may be dampened demand in the market due to more expensive mortgages leading to increased financial strain.
Rising Inflation – Rising inflation, which reached 5.1% in November 2021 has also caused a greater strain on household budgets. We are currently experiencing a cost of living crisis as inflation is increasing, resulting in services and goods such as food becoming more expensive. Furthermore, in addition to rising inflation, many properties have become even more unaffordable as the cost of house prices and their rises outstrip earnings growth.
These factors are expected to contribute to fewer home purchases as new properties will become too expensive for many, thereby further pushing housing market activity back to more normal pre-pandemic levels.
Selling Your House in 2022
So is the 2022 housing market a good time to sell? While there is still plenty of uncertainty surrounding selling homes in the upcoming year, the property market has proven to be incredibly resilient. The market has continued to rise through the many challenging circumstances it has encountered through the past 18 months. While the upcoming year may not be as frenzied as 2021, experts believe that all the signs are indicating a return to a more traditional market and modest growth in house prices. However, house prices are expected to maintain strong price levels.
An increase in interest rates, rising costs of living and the unknown future of the pandemic throws the future of the housing market into doubt and may change the landscape for those looking to sell a home in 2022.
There are many unknowns that make it impossible to identify the ideal moment to sell your home without hindsight. However, many experts believe that the signs are all indicating a strong market, making this year a good time to sell your home.