The housing market is subject to an overwhelming array of variables at the best of times, but recent years have thrown it one surprise after another, with covid following hot on the heels of Brexit and now the cost-of-living crisis and the war in Ukraine. It seems as if the moment one factor recedes, two arrive to take its place. And although we’re moving into the ‘living with it’ phase of the pandemic, no one knows what that really means or what’s around the corner in terms of new variants. Are we really beyond the era of lockdowns and restrictions or not? Is this the beginning of the resuming of normal life, or merely a short-lived reprieve before the next spike? Whatever the case, it makes housing market predictions a complicated and knotty proposition.
At the outset of the pandemic, the Bank of England expected prices to fall. Instead, Rightmove calculated that at the start of 2022, prices had increased by 7.6 per cent compared to a year before and buyer inquiries were up 24 per cent. The gloomy predications had failed to materialise and the market had not only got through the challenge of two years of on-off lockdown, but was actually as buoyant as ever. Trade association UK Finance calculated that 2021 was the strongest year for mortgage lending for 14 years, with £316-billions-worth of home loans being agreed. Between January and April 2022, the picture has only got rosier, with lockdown in some ways a positive contributory factor, since many Londoners who found the restrictions challenging in an urban setting were inspired to contact their chosen removals and storage company and move to the country in search of more space. This didn’t just benefit the market outside London; it also encouraged activity within the capital as people moved to surburban/leafy areas within the city (e.g. Dulwich). This lifestyle-reassessment trend, partly enabled by the increase in flexible and work-from-home jobs, has still not run its course. But what lies ahead in the second part of the year?
High Demand for Removals and Storage in May
Record highs are expected in May as the imbalance between buyers and sellers continues to drive up prices; recent estimates state that there are just 20 homes available per estate agency branch; the lowest figure for two decades. This is the picture painted by Reallymoving’s analysis. Drawing on more than 15,000 conveyancing quotation forms, they’ve established a three-month forecast which predicts a 6.7 per cent increase in prices in May. This represents an 11.9 per cent annual increase, although it should be taken into account that May 2021 brought with it a low average price. At the time, the Bank of England predicted a 16 per cent drop in prices as a result of the pandemic, but that didn’t happen. Instead, average prices went up by nearly 10 per cent that year and now, in the post-pandemic rush, the growth has only continued, with average prices now £34,000 higher than at the outset of the pandemic. Among the additional predictions is this, from Savills: homes in central areas will increase in value by 8 per cent in 2022 and by nearly 34 per cent by 2027, while those in the most sought-after suburbs will grow by 4 per cent in 2022 and as much as 13 per cent by 2027.
Prices to Fall In Second Half of 2022
Among the additional commentators is S&P Global Ratings whose recent research has found that the London property market is currently overvalued by up to 50 per cent, sparking fears of a slump when the inevitable correction occurs. The research points to several factors – the stamp duty holidays, low rates and the savings made during the pandemic – driving up prices in the capital and the South East. The figures are backed up by Rightmove’s most recent calculations which put the national-average cost of a home at £354,564 (the first time ever that the figure has gone over £350,000) and the London average up 6 per cent to £667,000. So while, right now, there is a rush to buy before mortgage costs increase, a situation exacerbated by demand doubly outpacing supply, a fall in prices is widely predicted for the second half of the year. For now, removals and storage companies are as busy as ever and the good news is that the prediction is for a gradually cooling-off, rather than a dramatic fall, as interest rates rise and mortgages become more costly, which will, in turn, lower demand for property. Already, there are portents of what’s to come; asking prices in Westminster, Kingston upon Thames, Greenwich and Bexley all tailed off slightly in February.
Impact of Sustainability Targets
Energy-efficient homes are more topical a subject than ever; not only do they enable homeowners to save on energy bills, they also increase a home’s value. Properties with the highest energy ratings are currently estimated to be worth, on average, £40,000 more than their poorly-rated equivalents. It’s likely that this will have a bearing on the activities of developers in the second part of the year, and it’s predicted that more legislation will come into force pertaining to environmentally-friendly home-building. It’s widely tipped that the government will increase the minimum Energy Performance Certificate ratings, meaning that all new rental tenancies will need a minimum rating of C by April 2025, a target which existing tenancies will have to reach by 2028. Because of the expense of meeting that target, may landlords will instead sell up. This will lower the number of rental properties on the market, increasing demand and driving up rental prices.
At the same time, the issue of dangerous cladding means that there’s still a section of London homeowners who are unable either to sell up or to afford the necessary work to replace the dangerous materials. However, Property Investor today have predicted that the government will step in to help affected homeowners – and if that happens, there could be another surge in selling activity, which will add to the growth of the market.