In 2021, several factors indicated that the housing industry experienced a record year. The coronavirus pandemic meant that a significant percentage of the population worked from home and, therefore, were reassessing if their home space met their needs.
In addition, the government introduced a temporary stamp duty holiday to accelerate the housing industry and provided incentives such as the furlough scheme. Rates of interest remained low from the beginning of the coronavirus pandemic to December 2021.
All these factors mean that the demand for housing in the UK outweighed supply, which lead to an increase of 10% in house prices in just one year. The predictions for 2022 indicate that this trend is set to slow down as the housing market gets back to a more sustainable growth level. This post will discuss some of the factors that influenced house prices and how the housing market is set to look in 2022.
City and Rural
In 2021, many cities experienced a mass exodus. More rural areas became prime locations for those who wanted to relocate. House buyers were willing to pay more on properties that offered additional multi-use spaces, bedrooms and gardens: thus, driving the price of these homes even further. By September 2021, the average price of a house in the UK had reached £280,000, which was an increase of £38,000 from the preceding year.
The closure of sports, nightlife and entertainment sectors meant that the savings of households were at their highest at this time. People had no other option but to stay inside, meaning that they could save up for a home deposit. This was evidenced by the increased numbers of approved mortgages.
Since the coronavirus pandemic began in 2020, the housing industry has enjoyed a considerable boom. During the first lockdown in 2020, the construction industry and the property market were forced to close. This led to a surge in demand for houses which was fuelled by a high number of people working remotely. In 2022, this trend is expected to slow down as the housing industry returns to sustainable levels of growth.
Besides the lifestyle changes that the pandemic caused, the government introduced an incentive of a 14-month stamp duty holiday. As a result, myriads of people swarmed to close house deals before the break ended in September 2021. The people who otherwise wouldn’t have afforded to move were able to consider purchasing a new house.
The combination of economic stimulation and lifestyle factors led to the increase of house prices in the UK. The problem with this growth level is that it is difficult to sustain. That said, expert predictions and market indicators show that the housing industry will slow down during 2022.
First, the stamp duty holiday has expired and, therefore, the demand for houses will not be influenced by the reduced prices of moving house. In return, this has led to a 30% decrease in the number of completed house sales in October 2021 than with October 2020.
The Bottom Line
Although the growth of the housing market is evidenced to be slowing down, the outlook for home prices in 2022 and beyond still looks positive. The housing market is still extremely robust, with house prices expected to keep increasing during this year. Moreover, thanks to a combination of a shortage of goods, supply problems and most importantly, the energy crisis, the cost of living is expected to keep increasing during 2022.
Whilst the extraordinary growth rates that were experienced during 2021 may not be seen again, many people are still working from home and the need for city centre housing is drastically reducing. This, alongside lifestyle shifts, and the progressive reassessments of living places due to the coronavirus pandemic, means that house prices are set to remain high during 2022.