According to Nationwide, 2021 was the strongest year for house price growth since 2006. Spurred on by the stamp duty holiday, furlough scheme and a re-evaluation of living requirements by many, demand for property far outstripped supply throughout the year.
So what are our housing market predictions for 2022?
One thing we have learned over the past year is that pandemics can make certain aspects of the future very unpredictable. However, it is relatively safe to assume that the first quarter of 2022 will tread a similar path to the one we walked at the end of 2021.
While many have managed to get-away for a break or enjoy a staycation at least, physical restrictions have curbed elements of people’s spending. The curtailment of particular live events, reduced socialising and even the cutback to commuting for many have all equated to a stockpiling of savings.
On the flip-side, it is likely that the rise in inflation rates that was experienced at the end of last year will continue in the same direction for the next few months. It is probable that the Bank of England base rate will also see further increases throughout the year. In addition, fuel prices have seen a significant increase to put further strain on households while wage growth has been relatively slow.
What does this all mean for residential property?
Residential Housing Market Predictions 2022
It is likely that the lending environment will become more challenging for many this year. Rising interest rates may limit the amount of borrowing at the point of purchase, which may cause some to stay put and wait rather than sell and move.
In addition, the Bank of England will be consulting over proposed changes to mortgage regulation in the earlier part of the year. The anticipated results may create easier lending conditions for first-time buyers but may also place new restrictions on mortgage lending based on borrower’s income.
Following where 2021 concluded, it will be sensible to predict a continuation of the trend for sub-urban, rural and commuter zone properties that support hybrid working. Will working from home remain entrenched throughout the year? This will largely be dependent on where any new variants of virus take us over the coming months. There will surely be a reluctance from many to return to an office environment full-time though.
The evolution of the regulation landscape will be a key area under the microscope of property investors throughout the year as change is inevitable and we await the release of the government’s Renter’s Reform White Paper. Already we have seen inklings of what may be in store regarding carbon zero homes, energy performance improvements and increased landlord legislation in the private rented sector.
2021 witnessed a change to the Ministry of Housing, Communities and Local Government (MHCLG) as it morphed into the Department for Levelling Up, Housing and Communities (DLUHC). An immediate consequence of this change may be temporary disruption to planning decisions, on top of delays that have already been seen due to covid.
Following the rapid growth of houses prices over the last 18 months, a slowing down should be expected throughout the year. For investors it is likely that capital growth will therefore slow, however net income yields should remain strong from high rental demand, continuing to give stable returns and security over the long-term.
Commercial Property Market Predictions 2022
The commercial landscape has seen some of the biggest changes as many businesses have experienced major disruption whilst others have flourished. This has not all been a consequence of covid however, as our exit from the European Union has made considerable contributions too.
Economic and employment growth will hopefully look positive for 2022, signalling good conditions for commercial property investments in general. Office space, which represents the UK’s largest commercial property sector, has been one of the greatest effected, especially within city centres. How will the office look post-covid?
It will be worth keeping an eye on regional office space as it may see growth where city centre offices have declined. A more agile working environment may see the rise of working space that meets commuter’s needs at a more local level. On this note, retail could follow a similar path.
Will the city high street be replaced by localised shopping? As many people have become acquainted with remote working, the reduction in travel may provide opportunity for neighbourhood convenience stores, cafes and other shops.
Warehousing is another significant sector of commercial property, and one where potential could be found. In particular, the rise of online shopping will create a continued requirement for retail warehousing. Consideration should also be made for how the future of the UK will look with regards to the import and storage of goods. Will additional warehousing be required and if so, in which locations?
Rising inflation is great news for anyone seeking angel finance this year as any cash savings will be rapidly devaluing. Coupled with a stockpile of cash that has accrued from reduced consumer spending and we have a perfect combination for win-win connections. Investing cash savings into a property venture this year will be far more attractive than allowing it to lose its value in the bank.
In short for 2022
At this early time of the year much remains uncertain for the property market. While we wait for changes in legislation to be announced, it may be business as the new-usual for the first part of 2022. In short, landlords should expect slowing house price growth, higher mortgage rates and tighter regulation.
Opportunities will continue to be available but may require some creative thinking, persistence and a change of approach as the country settles into a more consistent rhythm throughout 2022. Keep an eye out for upcoming blogs posts and podcasts to keep you up-to-date as the year unfolds.