Looking Ahead to 2022
The housing market could resemble something more normal looking next year, after the stamp duty holiday caused a surge of activity and double-digit house price growth in 2021. That means slower house price growth and steadier activity.
The early part of next year will be defined by how long the Omicron coronavirus variant dents confidence. However once more people get their third booster we’d expect more properties to enter the market and change hands.
Below, we analyse some of the trends to look out for in the New Year.
Continuing work from home culture
The widespread work from home culture that’s been established in 2021 is likely to continue into the New Year. This means some people will continue looking to live in the likes of the London commuter belt.
Workers are likely to walk with their feet if their companies don’t allow them to work from home at least part of the week, owing to the convenience of not having to go to the office. People have grown used to working from home, so things are unlikely to return to how they were.
Some who moved outside of the cities may return however.
While this work from home culture is likely to remain for good, many will seek to live in cities for social reasons, providing covid restrictions aren’t in place.
In cities top class concerts and sporting events are more readily available – it’s not just about work. Therefore we wouldn’t be surprised to see more flats in major cities change hands, as renters and young professionals look to enjoy the best of what they have to offer after a couple of years in the doldrums.
Base rate rises
The Bank of England finally raised the base rate in December, bringing it from 0.1% to 0.25%. The inflation rate is now 5.1% thanks to rising energy costs, which compares to the Bank’s target of 2%.
Given that raising interest rates tends to curb inflation, you wouldn’t bet against at least a couple more rate rises in 2022. This means mortgages could become a little more expensive as the year goes on.
How rapidly the base rate increases likely depends on Omicron – the more confidence is dented by the virus the more cautious the Bank will be about increasing the cost of borrowing for you and me.
Slower house price growth
Given that there’s a lack of housing supply in the market, prices will continue rising in 2022.
Halifax reckons price growth will flatten at around 1% in 2022, but we’d be surprised if growth was that low.
Rightmove has predicted that everywhere from the Midlands northwards, including Scotland and Wales, will see house price growth above 4%. This seems more likely.
Price growth reached 11.5% in England in September according to the ONS, so this represents a welcome slowdown.
When analysing which regions will see house price gains, it’s worth looking at new infrastructure in cities as well as the number of new homes being built.
House price growth could be steadier in areas flooded with new supply, but if city centres are redeveloped that could attract more buyers and renters, potentially pushing prices up.
The cities on the up
It seems plausible that more affordable cities like Liverpool, Manchester, Leeds and Birmingham could pull more residents in next year, especially as they’ve all attracted a lot of investment in recent years.
Liverpool’s The Strand and the waterfront are being transformed. The city’s £2bn Knowledge Quarter regeneration project has already attracted universities and the Royal College of Physicians. A new project is Liverpool Waters, a £5.5bn inner-city regeneration scheme introducing five new neighborhoods to Liverpool city centre.
Manchester is home to MediaCityUK, which attracted the BBC and ITV. What's next? The £1bn Northern Gateway Redevelopment will see the creation of new leisure and commercial spaces and new transport links and public spaces.
South Bank Leeds will see the redevelopment of 250 hectares of land, creating 35,000 jobs and 8,000 homes.
Meanwhile Birmingham is currently undergoing its Big City Plan. This will improve transport connectivity, create seven new quarters of the city, 28km of cyclist and pedestrian routes, and 5,000 new homes.
If you’re looking to buy an area where prices will rise in the long run – these cities may be good shouts.
Enlivened by railways
Railway projects are also likely to enliven a number of areas of the UK. London construction project Crossrail could have a big impact on the likes of Stratford, Forest Gate, Ilford and Brentwood.
Meanwhile HS2 could enliven places like Crewe and Warrington.
]The East West Rail project, connecting Oxford and Cambridge – could bring new life to areas in between.
Throughout the peak of the pandemic prices in the core of the capital dropped by between 20-30% on some properties, so this is a market in recovery.
Some of the wealthiest buyers are said to be pulled back to the city from the likes of The Cotswolds, Cornwall and upmarket towns – so it could be a stronger year in the heart of the capital, after the pandemic resulted in an unprecedented drop in demand.
While Omicron could result in there being slower activity for a few months, the lack of supply should uphold prices in the New Year. Some will continue living further from their workplaces, but we expect some people to be pulled back into cities if they find commuter life isn't for them.
Mortgage rates are likely to rise next year, though if you're going to need a mortgage you shouldn’t be too worried. Considering how shy the Bank of England has been about raising interest rates in recent years, it’s unlikely that the central bank will raise rates fast.
If you’re looking to buy in an up-and-coming area consider the cities with ongoing investment, as well as towns and cities enlivened by railway infrastructure.
Until the New Year we recommend you stay safe. The next year could be a good opportunity to buy - without being such a mad rush.