Will House Prices Drop? - Housing Market Predictions 2022

Updated: Jan 20


Have you been thinking of buying or selling, but keep putting it off until 2022? With the new year just around the corner, we’re seeing lots of home-hunters starting to put their moving plans into action and demand is still incredibly strong!


A summary of 2021


2021 in a nutshell was kind of crazy. In 2021 (up to the end of October) has already seen the highest level of completed home sales since 2007, and Rightmove forecasts that the total for the year will be an exceptional 1.5 million. The average for the more ‘normal’ years from 2014 to 2019 was circa 1.2 million.


The end of the stamp duty holiday has failed to dampen demand from potential buyers, which is up 30% on the five-year average. Zoopla statistics also state that homes collectively worth £473 billion will be sold this year, that’s up £95 billion on the number of offers accepted in 2020.


All of that demand has seen an increase in property prices.


According to figures from GOV.UK:

The average price of a property in the UK

was £268,349

The annual price change for a property in the UK

was 10.2%

*Correct as of the end of October 2021


In December, the bank of England raised interest rates for the first time since the start of the pandemic as they try to slow inflation. Base rates rose from 0.1% to 0.25%, and they even suggested further increases in the future which could put people off spending big as budgets are getting stretched.


We’ve also seen an increase in new build property average prices increasing faster than new build hinting at builders returning in confidence, the new Help to Buy initiative encouraging builders and buyers. We can potentially deem that developers are also building larger properties as the gap between previously owned and new build property widens.


With the increase in property sales, we’ve personally found that sales are taking longer to go through from offer to completion. Solicitors and conveyancers are buckling under the weight of additional demand, local area searches, surveyors, removals and almost every other service associated with moving property is causing longer completions.

Seven out of 10 properties advertised on Rightmove are currently marked as sold subject to contract, compared to just two out of ten back in 2012 showing that demand is higher than ever, supply is lower and property is taking longer to complete.


We’re seeing that buying with cash rather than borrowing on a mortgage can still potentially get you a slightly better deal with the annual change around the same amount with a £25,000 lower average, although some experts argue that cheaper properties are more likely to be bought with cash which is likely to reduce the average.


We’ve seen higher price increases for properties that are larger and potentially with more outside space, flats and maisonettes increasing by an average of 6.6% and detached houses on average increasing by 14%! This could be due to working from home meaning people want larger properties with more bedrooms, larger properties having an additional reception room or more space to put a garden room. We believe that the demand for working from home combined with clients wanting more outside to staycation has caused this separation in property price increases.


Mortgage Activity:


In 2021 we saw mortgage lenders are taking longer to process mortgages with the average time to offer being pushed out and taking longer to get through. This is also having a slight effect in slowing down property transactions.

2021 was the strongest year for mortgage lending since 2007, according to UK Finance. 316bn of home loans were estimated to have been given.

We’re seeing lenders come up with new initiatives allowing more debt over longer fixed terms.

We’re seeing lenders start to relax the way they view self-employed applicants and lenders starting to return to treating them similar to employed applicants.

Longer-term fixed rates are still incredibly good value compared to shorter-term fixed rates and in many cases only cost as little as 0.2% more for a five-year fixed over a two year. We expect to see base rates raising slightly to combat inflation caused by energy and fuel price increases. We’ll expect lenders to raise rates also so fixing in for longer periods is recommended.

Lenders are coming up with new incentives, we’re seeing potential lenders now going higher for first-time buyers and those on higher incomes. We’re seeing lending as high as ‘5.5 x income’ for lenders buying with just a 10% deposit!

In terms of remortgaging, we estimate an increase in remortgage activity with homeowners seeing more equity in 2022 and this could accelerate into 2023.

The high levels of equity homeowners have built up during the past 18 months and the shortage of homes on the market is expected to support house price growth into 2022.


So, what will happen in 2022?


Well, there are a few factors that we need to look at both negative and positive:

On the plus side:

  • Rightmove say that valuation requests from homeowners are 19% up on this time a year ago, suggesting more people will be making a New Year resolution to move.

  • It also looks like buyer demand is carrying forward into 2022, with November showing buyer numbers 41% up on election-subdued 2019, and still 3% up on booming 2020

  • Seven out of 10 properties advertised on Rightmove are currently marked as sold subject to contract, compared to just two out of ten back in 2012 showing that demand is higher than ever.

  • Better balance of supply and demand will suit more hesitant movers who may have held back from this year’s frenzied market, Rightmove predicts a closer to normal market during 2022:

  • Zoopla say that 22% of people currently want to move, significantly higher than the usual 5% in a normal market.

  • The ability to work from home has expanded the horizons for many office workers who now feel able to look further afield.

  • Depending on foreign travel Covid restrictions we may see high demands for UK holiday homes staying stronger than previous years.

On the downside:

  • The rising cost of living, combined with an expectation that mortgage rates and taxes will rise next year, will impact affordability.

  • Transaction levels are expected to fall by 20% to 1.2 million, in line with the long-running average but still comparatively high compared with the past decade

  • Rising inflation means higher outgoings, and this means that some people have less income to spend on their mortgage. As house prices reached record levels in 2021, affordability for first-time buyers could continue to be stretched.

  • The dreaded “C”. There’s still a potential looming of different variants of Covid and the pandemic increasing restrictions, slowing the economy, affecting employment, and generally being the nightmare that we’ve already witnessed!


What it means for house prices in 2022:


Zoopla suggests that house price growth is expected to end 2022 at 3%, with growth likely to be strongest in the East Midlands and Northwest and weakest in London. Richard Donnell, of Zoopla, said: ‘The impact of the pandemic on the housing market has further to run but at a less frenetic pace. ‘The latest data shows a turning point in the rate of house price growth, which we expect to slow quickly with average UK house prices up 3% by the end of 2022.’


Rightmove forecasts prices to rise by another 5% in 2022, some of the edge will be taken off sellers’ pricing power by increasingly stretched buyer affordability, and more buyer choice boosted by previously hesitant sellers now gearing up for a New Year move. According to Halifax, the boom in UK house prices is likely to end in 2022 due to household finances becoming increasingly stretched.

Russell Galley, the managing director of Halifax, said “With the prospect that interest rates may rise further in 2022 to subdue rising inflation, and with government support measures phasing out, greater pressure on household budgets suggests house price growth will slow considerably.” Halifax are expecting the increases in average house prices over the last 2 years to end, and the growth forecast to be “broadly flat” in 2022. Prices are £34,000 higher than it was at the start of the pandemic, but they expect that the growth would be between flat and 2% and they expect strong housing levels to be maintained.


In Summary:


Housing demand is still very strong, and buyers are finding getting their offer accepted is more of a fight than ever. Properties are taking longer to go through and we’re seeing purchasers moving towards shorter chains. There are still too few sellers and higher buyer demand that looks like it’s not slowing down. Mortgage products are readily available with lenders exploring new ways on keeping their staff busy.


We expect house prices to rise but not as aggressively as they have in 2021. We’d expect to see a spike of available property matched with an increase in buyers in later January / February as property comes onto the market in a wrath of new year plans which should see us through to early summertime when the market slows done slightly for the summer holidays. It usually gets going again in September which sees us through to the end of the year.


So how can we help?


If you’re looking - We want to be able to present your financial position in the best way possible meaning that should the seller be looking at multiple offers on their property you’ll be their obvious choice and ready to go straight away. This means getting you all setup and preliminary agreed with a lender and getting you solicitor and surveyor ready. Feel free to read our Help on Buying a Property Guide.


If you’re selling - We can look at options around your budget and let you know the minimum offer you could accept and still get to your own home, we can assist with buying and selling costs to move and even help qualify your buyers. In the event that something goes wrong within your chain, we’ll explore all options to rescue the chain. Feel free to read our Help on Selling a Property Guide.


Decided not to sell after all?

We can help you remortgage to a better rate, release capital for home improvements or help to consolidate debts.

Feel free to reach out to the team on 01702 864848 if you have any questions or concerns


*The UK House Price Index (UK HPI) captures changes in the value of residential properties.



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