2021 will go down in the history books as a memorable year for the property market, as UK homes repeatedly smashed previous records for the highest average prices ever.
According to the UK House Price Index from the Office for National Statistics (ONS), average house prices rose 10.2% over the year to October, when data was last available.
In real terms, the average house price in the UK was £268,000, with English homes reaching all the way up to £285,000.
In London, these figures are even more remarkable. According to property search site Zoopla, the average value in the capital as of December 2021 was just under £675,000 – more than twice the national average.
These remarkable figures beg the question: what will happen to house prices in 2022? Is there space for continued growth? Or has the market reached a peak that will settle down over the next 12 months?
Find out what the experts are forecasting for house prices in 2022.
Busy but “less frenzied” than 2021
The 2021 property market has been remarkably busy this year, and so it seems unlikely that growth will continue at the same rate.
Regardless, search site Rightmove is still predicting continued growth of 5% in asking prices in the new year – around £17,000 more, on average, in real terms.
The site has forecasted a 7% rise in prices in the most sought-after regions for buyers, which currently include Scotland, the west Midlands, the south-west, and Yorkshire and the Humber.
Meanwhile, London may struggle to keep pace as city living becomes simultaneously more expensive and less desirable. As a result, Rightmove has predicted growth of just 3% in the capital.
Similarly, in its five-year forecast, estate agents Savills predicted a 3.5% rise for prices in 2022, culminating in an overall 13.1% increase by 2026.
In this time, Savills believes the north of England will see the greatest growth, with homes in the north-west rising 4.5% next year and 18.8% over the next five years.
Meanwhile, London homes will lag far behind, climbing 2% in 2022 and just 5.6% overall by 2026.
2021 growth fuelled by Stamp Duty holiday and the “race for space”
One of the biggest issues that looks set to dampen the property market’s continued performance is that the factors that influenced the 2021 boom were relatively short-term.
Experts have largely pointed to the Stamp Duty holiday, pent-up demand from lockdowns in 2020, and the “race for space”, in which city dwellers desired gardens rather than convenient commuting times, as significant factors in the market’s impressive growth.
These short-term influences are likely to be at their end: the Stamp Duty holiday is now over, much of the 2020 demand has made its way out of the pipeline, and most of those who sought more space now have their homes, meaning they’re unlikely to move again.
As a result, this could see the market slow down considerably in comparison to 2021.
In fact, analyst predictions published in FTAdviser in October pointed to a range of other, similar factors that could see the market struggle in the first few months of the new year, including:
- The continued impact of Covid-19
- Uncertainty related to Brexit
- Inflation and the continued increase in the costs of living.
This prediction was made before the newly discovered Omicron variant, too. That means Covid could yet wreak havoc on the market, especially if it leads to the introduction of more restrictions or another lockdown.
A slowdown doesn’t mean a full stop
It’s worth noting that, even if the growth of house prices does slow down, this will only be in comparison to a remarkable, record-breaking year.
Indeed, estate agents Hamptons remained relatively optimistic about 2022 house prices in the firm’s September executive summary. Instead, their analysts see a slowdown merely as a return to standard form.
In fact, the company believes there are factors that could still encourage further growth. These include the remainder of lockdown-induced demand that is yet to be met, and the desire for wealthy homeowners to cash in on both larger homes and rental properties.
Similarly, as inflation climbs, the estate agent suggests that interest rates could be yet to hit rock bottom. This could encourage buying among first-time buyers in the new year.
As a result, Hamptons have forecasted growth of 3.5% in 2022, with a further 3% increase in 2023. While these figures may be far more modest than the explosive nature of 2021, they’re still roughly in line with the kind of levels seen pre-pandemic.
That means 2022 could simply be the market finally pricing itself back to normal.
Work with us
No matter what happens to house prices in the new year, we’ll be here to support you as ever.
If you’d like to discuss your housing or mortgage needs, please get in touch with us at London Money.
Email enquire@london-money.co.uk or call us on 0207 808 4120 to find out more.
Please note
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