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UK Property Market Observations

We all know that the property market can be a fickle thing. The last twelve months have been not so much a roller coaster, more like a continual climb into the stratosphere for some areas of the UK.

So, will it continue, and is a dip or even a major drop just around the corner?

There are many questions to consider.

  • How sustainable are the current prices of property across the UK?
  • What lasting influences will the pandemic have had on our working practices and what will that mean for property in the UK?
  • Ultimately, has the pandemic permanently changed the way we live and work?

Here at Open Property Group we wanted to share some of our thoughts and observations on the year ahead and how we thing things may pan out.

A different picture across the UK

Let’s start with what some of the experts are saying.

In the last 2021 Zoopla UK House Price Index report, published in November 2021, Grainne Gilmore, Head of Research said:

“After a busy start to 2022, the market will start to move back to pre-pandemic conditions, allowing supply pipelines to rebuild. However, the demand/supply imbalance will not fully unwind, and this will be one factor supporting price growth of 3% next year”

The question is, will it?

2021 saw unprecedented increase in house prices driven by changing working attitudes, a desire to move out of the cities, and a major cultural shift in attitudes toward commuting and the work life balance. That won’t all suddenly disappear, so will the slow return to a more normal life change the huge demand for housing?

The continued demand for housing has resulted in consistent upward movement in prices, Manchester up by 8.5%, Liverpool by 10.7% while parts of Wales have seen growth in excess of 13%. Compare this with London where prices are well behind the national average growth rates and in the city, they actually fell by 1.8%.

First time buyers

For first time buyers and those looking to get onto the property ladder this has a huge impact, with wages rising at a fraction of this amount the options are limited.

This could possibly result in a change of approach from the Government as next year is the last full year that first time buyers are able to benefit from the Help to Buy scheme. A rethink may be needed to support first time buyers, especially as the current forecast on interest rates shows them on the increase through 2022.

Property demand outstripping supply

What we do know is that supply will still fall short of demand for the foreseeable future.

In 2021, it is said there were on 19 buyers chasing every newly listed home. It’s true that a return to more “normal” working practices will help the industry realign itself, and to start to operate at a more natural pace, but as an industry sector we will continue to see increased demand driving prices. The growth we don’t anticipate being as vigorous as in 2021, but it will still be there, just a little subdued.

So, what will drive that slight slowdown in price growth?

Economic factors

Well, we have numerous unknown macro factors which will affect supply & demand. We have already seen the first base rate rise from the Bank of England, modest through it was, and experts are saying there could be at least another rate rise in 2022, to help kerb inflation.

A rise in rates makes borrowing a little more expensive, but with mortgage rates still at historically low rates, borrowing remains cheap. What it will do is make people think a little more before making the important property purchasing decision, thus normalising the ‘decision window’ from what has been a very frantic time in the sector.

Houses v flats

This post-Christmas period always sees a climb in enquiries, listings and ultimately sales. After a Christmas at home, many will now be looking to find that new home with a little extra space, an additional bedroom, a bigger garden, or just simply a move away.

For these reasons we could see a very different picture across the UK based upon property type and geographic location.

The demand for flats and apartments has experienced slower growth rates and this should remain static, as more people look for houses, thus stemming flat price inflation. However, as workers are needed back in the office, could this trend reverse? Time will tell. Just don’t expect double digit growth.

According to Zoopla, there are positive signs within the rental market. The private rented sector is expected to rise 4.5% nationally in 2022 and for the first time in 16 months London rents are starting to rise. A trend also witnessed in Manchester and Birmingham, as workers return to the cities, at least for some of the week.

In our opinion, many Northern regions are still undervalued, and property prices are supported by healthy yields available to investors. The yields achievable are typically double what is available in London & the South-East and these areas should provide excellent opportunities for investors.

In summary…

So, what our crystal ball tells us above all else, is there will be growth. Not as aggressive or as raw as it was in 2021 but, the market will grow, possibly between 3-5%. The scope for increase in the Southern counties is more limited, hence why we see the North, Midlands and the North-West as the property hot spots of 2022.

The Government has some serious ground to make up in the next 12 months and will be eager to restore public confidence if it wants to retain the voters it “turned” at the last election. We therefore see more investment in the Northern Powerhouse and implementation of significant infrastructure improvements to aid their “levelling up” strategy.

So, we envisage a property market still on the up, geographic variances and opportunities within the UK but, challenges for first time buyers and some sectors within the property market.

Economic factors, inflation and subsequent base rate rises could yet stifle demand, but overall, the factors are still looking positive. In the meantime, here at Open Property Group we’ll continue to give you our view on the outlook for the sector and the long and short term impacts its faces.

Published on 20th January 2022

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