Last year saw another year of strong growth in the residential property sector – here are my predictions for 2022.
UK HPI data (House Price Indices) saw an average price of detached properties increase by 10% in 2020 with flats increasing by 5% during the same period. This data was trumped in 2021 with the average price increasing by 14% and 4% respectively.
One of the offshoots of the pandemic has been the acknowledgement of the need for change in the business sector. A reset was in the offing. Businesses were scrutinising their overheads, non-essential office workers continued underpinning operations at home. The importance of Mental Health and a new normal was beginning to take shape.
In some areas, this has led to a change with employers now allowing their staff to either work permanently at home and/or divide their time between the home and the office.
This has increased the desire for more flexible home working spaces. In addition, larger houses or properties in more rural locations have seen a huge increase in demand.
Remote/flexible working is likely to be here for the foreseeable future, and this will continue drive prices up in 2022.
What’s the outlook?
The demand for “Escape to the Country” style properties does seem set to continue in 2022.
The country has seen those with disposable income (who had held off moving during the pandemic), save significant sums of money to supplement house deposits and other property related work over the last 18 months.
These savings, together with renewed appetite from lenders for a fast start to the year, will see demand remain disproportionately high in Q1 and into Q2 2022.
Is this bad news for city centre flats?
There has been a real shift away from the days where we commute long distances to the office, leaving and returning home at unsociable hours or even staying away from the family home during the week.
City Centres, including Manchester in particular, are still hives of activity with large apartment blocks being built-in ever-increasing numbers. Many of these tower blocks are seen as the legacy of pre-pandemic commitments that have now seen demand and prices soften slightly. Consumers are now looking for something a little different.
What we are now seeing is the rise in the “convenience apartment” where additional features such as gyms, cinemas, coffee shops and meeting/breakout areas are being built to support that flexible living/working environment.
Will developers cope with demand?
I recently took a trip to Scotland and I was amazed at the number of large (300 plus house) developments that were under construction to the east of Edinburgh. When I questioned this, I was told that the demand was huge and that the properties were expected to sell quickly. In England, there are currently 19 buyers for every newly listed property to the market.
The above is being replicated around the country now and developers are on the lookout for land banks in more rural locations to meet demand. Inner cities are being seen as less desirable as more people crave the suburbs and countryside locations.
How will the economic outlook affect budgets?
The forecast for property growth is less than the double digits that we have been used to over the last few years. This caution can be put down to the current and predicted cost of living increases that are likely to culminate in future small base rate rises in an attempt to stem the rise in inflation. Cost of living increases hit our monthly budget and generally dent consumer confidence.
Lenders are still fighting for market share in the residential mortgage market and this has traditionally meant that rates remain competitively low, however, we have started to see some small increases in fixed rate mortgages.
I would expect the above factors to impact growth in 2022 and will see us in single digit growth. Housing specialists such as Zoopla and Rightmove are forecasting growth of between 3 and 5 percent in 2022.
Article by Ben Horsfield
Head of Mortgage Services
Suttons Independent Financial Advisers