2021 has been a historic year on many fronts. Not only do we remain in the midst of a deadly pandemic, but UK house prices have risen at their fastest pace in 15 years according to Halifax. Housing supply, meanwhile, is at its lowest level since 2004. Whilst the Stamp Duty holiday kept transactions strong for first-time buyers, the race for space continued in the countryside, leaving many feeling frazzled to say the least. Some pundits are speculating that this trend simply can’t go on, but what lies ahead for the market in 2022? Our clients give their expert views.
London is bouncing back
Lockdown caused a London exodus this year, as many yearned for more space. But the property market in the capital is starting to make a comeback. Prime Central London suffered the most with the absence of international buyers, but in many ways this gave domestic purchasers more opportunities.
Edward Heaton, founder and managing partner of buying agents Heaton & Partners, commented:
“Domestic buyers, or at least those who live in the UK, have dominated transactions this year unlike anything we’ve seen for generations. The ‘dingy basement flat’ saw a revival as the ‘gorgeous garden flat’, with outside space at a premium. Trophy penthouses were snubbed in favour of smart family houses with outside space in leafy locations like Wandsworth, Hampstead and Wimbledon. Internationally, many had their hopes pinned on Hong Kong buyers coming over here thanks to the new visa route, and although we did see a healthy wave, it was just a drop in the ocean to the overseas drive prime London is very much used to. The backlog of international buyers is only just coming through now, so I think next year will be very busy for PCL.”
Kush Rawal, Director of Residential Investment at SO Resi, believes London’s affordability will play a leading role next year:
“The reality is that buyers still want to live in the city. In the last 12 months we have sold out at several schemes across London, including in Clapham and Croydon. Young people aren’t interested in moving out to the sticks, they want to be in the thick of it all. Ironically, this demand comes with its own set of problems, as house prices are once again rising in London as it becomes more desirable, and therefore those very same buyers become priced out of the open market. Help to Buy has been axed and despite futile attempts to plug the gap with fillers such as 95% mortgages and Deposit Unlock, homeownership is still unattainable for ordinary, hardworking people. Shared ownership is more essential than ever before, offering a genuinely affordable route to homeownership at an accessible price point in areas people actually want to live in.”
The Levelling Up agenda
Levelling Up will remain front and centre of the government’s political agenda for 2022, even putting it in Michael Gove’s job title. Focusing on new infrastructure, helping farming and fishing industries, and creating freeports for deprived communities, will this renewed investment have a ripple effect on construction and house prices away from London?
“Levelling up aligns with our very own mission as an organisation to ensure everyone has access to equal opportunities to improve their lives – and we know that having a safe, quality home is key to enabling this. We hope that 2022 will be the year we see a collective effort to improve lives and access to affordable housing.”
Simon Cox, Managing Director and Founder of independent land agency, Walter Cooper, believes a reshuffle of power may lurk ahead following a turbulent year. He commented:
“I wouldn’t be surprised if we saw a new housing minister: history is instructive and tells us that we will. Gove is assessing his position politically more than producing real change. Boris doesn’t look like he is wielding huge amounts of power at the moment. If current trends continue, it wouldn’t be outlandish to predict a leadership challenge for the Conservatives.”
Hotspots and house prices
No one has a crystal ball, however property giants have generally estimated that house prices will rise anywhere between 1% and 6%, as inflation and soaring demand continues. But is all as it seems?
Dean Markall, Sales and Marketing Director at Martin Grant Homes, commented:
“2021 has been the sequel to a truly unpredictable 2020, and while it seems ludicrous to even try to predict what 2022 may bring, there are some growing hints that we may still see struggles yet. While we treacherously coin phrases like post-pandemic and return to normality, the industry is facing even wider challenges – not least a shortage in materials across the board which may stunt the industry’s attempts to build the volume of new homes needed. 2022 will also see the beginning of Help to Buy’s shutdown, a scheme so successful that it has propped up the housing market since its inception. There is no doubt we will see a ricochet effect across the country as the rug is pulled out from underneath us.”
Despite the overall worries of the supply shortage, there is hope in the housing market. Dean notes that the East Midlands is a location to watch next year.
“Northampton in particular is a hidden gem in the Midlands, and with no dominant second homes market, prices are generally within budget for local first time buyers and second steppers alike.”
According to Simon Cox, Managing Director and Founder of independent land agency, Walter Cooper there is a big chance that the housing market will not be marginally different from what it is now.
“As interest rates rise, so money will become more expensive to borrow, which will lead to a drop in demand in the latter part of the year where house prices will stall slightly due to affordability. However, as construction plays catch up, this will help us meet our new homes targets and boost supply. You take from one hand and give with the other, so all in all I think it would be surprising if things were markedly different than where they are now.”
An overheated rental market
Like housing, the demand for rental property is at an all-time high. Rental demand doubled in major UK cities throughout 2021, according to Zoopla. Santhosh Gowda, the Chairman of property developer Strawberry Star, believes this imbalance will put the Built-to-Rent (BTR) market in sharp focus for 2022.
“2022 will be the year of Build-to-Rent (BTR). Stock is astonishingly low, both in lettings and sales supply, putting huge pressure on prices and forcing people to make some really tough choices on where they can live. We saw earlier this month that Zoopla reported a 13-year high in private rental values, whilst demand for rental homes was 43% above the average, but the number of properties available to rent was 43% lower than usual. BTR provides an obvious solution to this highly pressurised market, boosting much needed supply and replacing many private landlords who left the sector after a turbulent pandemic year.”
A Proptech boom
Technology will continue to blossom next year, in an era of lost face-to-face connections. Tenants have become more attentive to the space and facilities inside their homes too, meaning engagement between landlords and tenants has never been so important.
Jeremy Heath-Smith, CEO of Proptech app Spike, commented:
“Yet another year has gone by when people have spent lengthy amounts of time being at home – causing a long-term change of mindset when it comes to what is important about where you live. It’s not just the obvious – room to move, fresh air, access to the outdoors – in fact, as the amenities and facilities being provided by operators are becoming less differentiated, so the decision on where to live is becoming less and less about the building, and more about how a tenant can see themselves building a life there. The challenge for landlords is how to set themselves apart, and here at Spike we see community engagement [through technology] playing an increasingly important role in attracting and retaining tenants.”
First time buyers
Lynda Clark, CEO of First Time Buyer Group comments:
“What a year for first time buyers. Looking back, one of the key drivers of activity in the housing market over the past 12-18 months has been the race for space, with buyers seeking larger properties, often further from city centres. This, coupled with the government’s stamp duty holiday, injected life into the housing market during a time of adversity.
As we look towards the end of the year, and although the outlook remains uncertain, I’m excited to see the government continue to invest in making homeownership accessible in 2022, by bringing even more initiatives to the table. Alongside the traditional Help to Buy and Shared Ownership schemes, the Deposit Unlock and new 95% mortgage offering should encourage aspiring homeowners to step onto the ladder.
It’s also great to see the focus shift onto sustainable, greener homes too. Initiatives such as the levelling up fund is a step in the right direction, and we hope will create an affordable equilibrium between housing supply which fails to keep up with current demand. Many renters or young professionals with the goal of owning their own home are struggling to make it happen but I’m hopeful that 2022 will be their year.”
And what about Bonnie Scotland?
The property market in Glasgow and Central West Scotland is likely to remain steady next year but characterised by an acute shortage of stock, much like the UK.
John O’Malley, Chief Executive of Pacitti Jones, commented:
“Most properties launched to market this year have sold extremely quickly, often within two weeks, and usually at closing dates with multiple offers well in excess of the Home Report valuation, quite often by as much as 20% and sometimes at nearly 30%. The biggest issue is the lack of stock. While the market has eased somewhat, relative to the frenzied activity across our offices this year, demand still far outstrips supply and prime properties in sought-after areas continue to attract substantial premiums.”
David Mooney, Managing Partner and head of Pacitti Jones’ Stirling office, concluded:
“Looking ahead, I think we will still see a solid performance, but we are likely to see fewer offers so excessively over the Home Report. The migration seen over the last 12 months motivated by changing lifestyles brought about by the pandemic has largely been satisfied. I think buyers next year will be driven by more traditional factors such as changing circumstances, upsizing, downsizing and job locations. It’s going to be an interesting year, but I am confident the market will remain buoyant.”