Double-digit annual price growth and a shortage of stock summed up the property market in 2021 but as this year gets underway, buyers and sellers are wondering whether there will be more of the same. With many of those planning to move having already done so, the stamp duty holiday in the past and the interest rate rise at the end of last year likely to be only the beginning of a number of hikes, the question is whether these factors will combine to put a dampener on things.

House price growth

It would be hugely surprising if house prices continue to rise at such an accelerated pace in 2022 as they have done over the past 18 months. Indeed, with house prices hitting a record high in December, according to Halifax, and the average home costing £24,500 more than a year ago, it is in few people’s interests that they carry to increase in value at the same pace. If first-time buyers are struggling to drum up deposits and get a big enough mortgage to buy their first home, it has an impact on mobility across the housing market. As for existing homeowners, many of those selling up are moving up the ladder to a bigger, more expensive property, so while they may get more money for their home, they will also have to pay more for the next one.

Although many people have made a move, the UK housing market will always have a limited supply of quality homes, due to population growth, and there is still plenty of pent-up demand, which will support prices to an extent. Even though a return to full lockdown conditions is unlikely, anecdotally there are still plenty of buyers looking for more space and local amenities. However, as interest rates and inflation rise, house price rises will be more muted since affordability will become more of an issue and buyers will feel less bullish than they have done. That said, any increases in base rate will be managed carefully so as not to bring on a recession, as many people are still suffering from the financial impact of Covid.

Changing work practices

The way in which people work has probably changed forever, with most employers accepting that some employees will work from home more often, taking advantage of technology. This has given parents, in particular, a quality of life that was missing, enabling them to drop off and pick up the children, while still being able to work. This in turn will mean that property prices in commuter belt areas stay strong and probably rise, since workers do not need to travel to the office as often.

Covid has focused the minds of buyers like nothing else, persuading people to move further out of urban centres in the search for more space. Unsurprisingly, house prices performed most strongly in Wales, the north of England and the south-west as working patterns changed. While London property prices did not rise at the same pace, affordability in the capital remains incredibly stretched, making it worryingly difficult for a young workforce to buy in London.

Those who wish to buy this year may need to manage their expectations as to what is viable and what constitutes their ‘dream’ home. Not every box will be ticked. There may be an opportunity for sellers whose homes are not ‘best in class’ to find a buyer this year, thanks to the continued lack of supply and demand from those who still want to make their move.

A return to ‘normality’?

It will be interesting to see the housing market return to a level of normality over the next few months, without the government stimulation in the form of the stamp duty holiday which fuelled much of last year’s activity.

Business has been buoyant as we start the year, with plenty of enquiries coming through. January can be quite slow as people gradually get back to work and find their feet but there are motivated buyers who are keen to take the plunge, particularly before interest rates rise further.

An easing of stamp duty for downsizers looks increasingly necessary in order to encourage them to move, free up larger family homes and keep property price growth at a more manageable level.

How MT Finance can help

If activity in the housing market is brisk and there isn’t a significant increase in the number of properties for sale, buyers who require a buy-to-let mortgage may find that getting their finance arranged quickly enough to put themselves in pole position can be a challenge. With first and second-charge bridging loans available, MT Finance can support those looking for short-term funding who want to put themselves in the strongest possible position to secure an investment property.

We can arrange bridging finance in the shortest of timeframes, lending from £50,000 up to £10m at up to 70 per cent loan-to-value, with terms from one to 24 months. Get in touch for more information via our enquiry form, email or on 0203 051 2331.