While other sectors were hit hard by the pandemic, the property market has defied most forecasts. As if this wasn’t already a strong situation for those invested in property, the UK bounced back quickly from one of the worst economic performances and the Government supported the industry with the Stamp Duty Holiday.

But what will happen to the housing market in 2022? Will house prices continue to grow? And what will be the impact of a rise in interest rates? First of all, it’s important to understand a few key economic measures to gauge what is likely to happen to the property market next year. The factors include:

Gross domestic product: This plummeted by 9.8% in 2020 but is forecast to increase by 6% in 2022, after a 6.5% increase in 2021, bringing us back to pre-pandemic levels.

Unemployment: The fear was that unemployment would rise when furlough ended, however, the predicted unemployment rate post-furlough will be around 5%, the higher end of the 3-5% average. That’s good news, as lower unemployment supports a healthy property market.

Wages: An increase in the minimum wage and a better tax break for those on Universal Credit returning to work, matched with general wage rises, will support rental income levels.

Inflation: The Government’s target inflation rate is around 2%, however the forecast for 2022 is likely to be double that, so this is one of the only areas of concern. This is due to several factors, including a labour shortage, an increase in energy bills, and rising food prices.

Interest rates: As of January 2022, the Bank of England base rate is just 0.25%, making mortgage rates some of the lowest ever. However, these rates are usually used to keep inflation in check so expect the era of ultra-low ones to come to an end shortly.

Confidence: Upbeat news generally influences buyers and sellers, so positivity surrounding the economic bounce back should continue to keep the housing market stable going forward.

House price growth

Continued good news in the sector means that many forecasts predict that house prices will continue to rise in 2022. Capital Economics suggest that house prices will rise by 2.5% in 2022, taking us back to ‘normal’ pre-COVID growth rates. Meanwhile, Price Waterhouse Coopers (PwC) is more optimistic in its predictions, suggesting that prices will rise by 1% to 4% in 2022.

Property prices are predicted to continue to rise because of:

  1. Equity levels being high
  2. Demand being higher than supply in many areas
  3. Wages rising, allowing people to borrow more money
  4. Mortgage finance remaining plentiful and affordable, even with forecasted interest rate rises
  5. Consumer desire to have the kind of home they really want, which is offsetting any lack of confidence in the economy.

It is important to remember that these factors will vary depending on the region. For example, prices in London have not performed as well as they have in the past. When the pandemic hit, demand fell versus supply and mortgage borrowing became restricted – especially for first-time buyers. And when those at the bottom of the chain can’t afford to offer as much, it tends to keep prices in check all the way up the chain. In our experience, only your local expert agent can advise on supply and demand, as it can differ even from one road to the next. It can also vary by different property type – for instance, one-bed flats might be hugely popular in some areas, whereas in others it might be five-bed detached homes.

Rents are on the rise – mostly

Rents have picked up considerably since Q2 2020, rising by 2.1% in Q2 2021. If we remove London from the figures, average rent was up by 5% year on year – a 13-year high. This is in contrast to the capital however, where rents fell by 3.8%.

Looking to 2022 and beyond, with similar stock constraints to the homeowner market, wage rises forecast to continue at all income levels, and the economy picking up strongly, rents are expected to continue to rise – great news for both existing and new landlords.

What does the rise in prices and rent mean for landlords and property investors?

Forecasts can be useful to understand what might happen in the property market and how the industry and other buyers and sellers will react — but it is important to remember that these are all just predictions. Regardless of what these markets are saying, there are always individual ‘deals’ to be done; they may just take more time and diligence to spot.

Like any financial venture, the property investment market will naturally rise and fall over time, but for those that can invest over the longer term and ‘ride out’ any temporary downturns, having property as part of your investment strategy can really help deliver on your financial objectives.

However, in today’s world, as supply and demand is so specific to an area, simply buying any property on any street is not necessarily going to result in a successful property investment, as used to be the case in the ‘90s and early ‘00s. In fact, it’s quite the opposite – unless you plan carefully and take expert advice, it’s all too easy to end up with something that will end up costing you money, rather than growing your wealth. So it’s essential to seek advice from a professional local property agent, a mortgage broker who’s experienced in buy-to-let, a good legal company and an excellent surveyor.

Our full 2022 Property Market Forecast covers the following in greater detail:

• Price forecasts, including supply versus demand, equity levels and mortgage availability
• Rental forecasts for 2022
• Transaction levels – and is now a good time to buy?

Download your copy of the 2022 Property Market Forecast today.

At Leaders Romans Group, we can help put you in touch with our property experts. If you would like any advice or have specific questions about your property investment or any of our services, please don’t hesitate to contact us.

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