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Defying Expectations: The UK Property Market

In May 2020, the Bank of England predicted that house prices could fall by up to 16% in direct response to the pandemic. For those who were trying to sell their homes, this caused a lot of uncertainty, especially in an already uncertain market.


In this week’s blog, we examine the current state of the UK Property Market, how it has changed, and what it may look like as we move through 2022.


According to recent figures, the UK housing market is defying expectations despite the Bank of England’s warnings in 2020. The average property price in the UK has increased by 9.8% despite the pandemic and the negative impact it has had so far on the rest of the economy. With an average increase of over £24,000, this is the largest annual increase since the beginning of 2003.


But what’s behind the increase?


To understand this increase in more detail, a number of factors need to be taken into account. Perhaps the most significant was the Stamp Duty Land Tax holiday which ran until July 2021. Stamp duty was waived for homebuyers purchasing a property with a value of up to £500,000. Additionally, those who purchased properties over £500,000 would only be liable for stamp duty on the excess amount.


In addition, the need to work from home during 2020 and 2021, combined with people spending more time at home, has also played a key role in driving a ‘race for space’. This trend seems unlikely to change in the near future.


In addition, home buyers’ spending habits need to be considered. As a result of the pandemic, more people spent more time at home, thus spending less which provided the time and opportunity to save for larger deposits for purchases. The increase in savings through the last two years is well documented.


So, how does 2022 look?


This rise in house prices looks set to continue through 2022, however, there are a few factors to consider that could cause a slowdown.


Increasing inflation, higher energy prices, the spectre of interest rates rising could all put a financial strain on many households and homeowners. These factors could cause us to see a slowdown in housing market growth in 2022.


On the other hand, 95% mortgages are now readily available to first-time buyers. This will create more buyers and therefore more demand on the ‘first rung’ of the housing ladder.


There is also the housing shortage to consider. It is no secret that the recent price increases have been seen as a challenge for many parts of the country. This is because it is has become increasingly difficult for people to purchase affordable and quality homes.


The government is already responding to this and has called for the barriers in housebuilding, particularly those that affect small and medium-sized construction businesses and property developers to be removed in order to help improve the housing supply countrywide.


Therefore, our prediction is that throughout 2022, we can expect to see property prices continuing to rise but at a slower rate than in 2020 and 2021.


In the meantime, do you need Property Finance? Are you a developer looking to finance a new project?


Then get in touch with our experienced Property Finance team today to discuss your requirements and find out how we can help you obtain the financing you need for your next project.


Contact us on 020 3857 3030 today.