The 2022 property market: What could happen?

client record illustration

Following on from my 2021 reflection, I’ve gathered a few insights and some data snacks, based on our own data, for what to expect in 2022’s property market.

2022 Property Market: Photograph of Eligible founder Rameez Zafar

Let’s take a look and see what’s in store for the 2022 property market.

How will things start for the 2022 property market?

The housing market is expected to start 2022 on a strong footing. The pent-up demand caused by the Covid-19 pandemic still has further to run, while homeowners often use the pause provided by the Christmas period to make moving decisions and conduct initial online property searches.

Buyer demand is expected to remain strong in the new year, but there should also be an increase in the number of homes being listed for sale, somewhat easing the shortage of supply.

As a result, January is expected to be a busy month for the market and the current boom is expected to continue during the first quarter of 2022.

What impact will omicron have on the 2022 property market?

Predicting what impact omicron will have on the housing market is difficult, as while the variant appears to be more transmissible, it is still not known if it is more likely to lead to hospitalisation, particularly among those who are vaccinated.

If it does lead to a steep increase in case numbers in the UK, as appears to be the case in South Africa where the variant was first sequenced, it could lead to another lockdown in the new year.

That said, the housing market remained open during the last lockdown and property viewings and sales were able to go ahead as long as social distancing measures were followed, so omicron is unlikely to lead to a sharp slowdown in activity.

At the same time, it may mean that those who had returned to the office go back to working from home. It is also likely to reinforce the belief that pre-pandemic norms are still some way off.

Both of these factors could cause homeowners, who are weighing up a move to a larger property, to decide to go ahead with a purchase.

What else might impact the housing market?

While demand is expected to stay strong in the 2022 property market, there are a lot of headwinds facing the market.

The biggest threat is rising inflation, with Consumer Prices Inflation running at 4.2% in October, the highest level for nearly 10 years and more than double the target of 2%.

As a result, the Bank of England is widely expected to increase interest rates, with economists predicting the official cost of borrowing could end 2022 at 1%, up from its record low of 0.1%.

Not only will any increase in interest rates feed through to higher mortgage rates, but rising prices will also impact the cost of living, which will, in turn, reduce the amount of income people have available to allocate to mortgage repayments.

Housing affordability is already stretched in many areas of the country, so higher monthly mortgage payments and lower levels of disposable income could act as a brake on the market.

At the same time, while omicron may not impact the housing market directly, it could slow the wider economy, particularly if social distancing measures are reintroduced, leading to slower wage growth and even rising unemployment.

These factors are expected to lead to a cooling in buyer demand as the year progresses.

How much will house prices rise in 2022?

The million-dollar question.

Predicting how much house prices will increase is not easy at the best of times, but there are even more variables than usual in the 2022 property market.

Zoopla is predicting price growth of 3% for the year, just under half the level of current price rises.

But it expects the market to remain busy and has forecast 1.2 million homes will change hands during the year, down from an estimated 1.5 million in 2021.

Economists are predicting slightly higher price growth, with a poll by Reuters showing a consensus forecast of 4% in 2022, with some economists pencilling in gains of 5%.

Is it still a seller’s market?

With demand expected to remain elevated, particularly in the early part of the year, clients can expect strong competition from other buyers.

If your clients have a home to sell, particularly if it is a family property, they should be in a great position to not only secure a fast sale but also achieve the asking price. They should consider listing their property early on in the year to take advantage of the high levels of activity anticipated during the first quarter.

However, gross lending is due to dip by 35bn in 2022 as the market stables which gives firms a chance to catch their breath and an opportunity to set themselves up for sustainable growth.

What opportunities are there in the 2022 property market?

According to UK Finance, homeowner remortgaging activity is set to pick up over the next two years, reaching £69bn in 2022 and a significantly greater £93bn in 2023 – which highlights many opportunities on advisers’ doorsteps over the next two years alone.

According to our proprietary data, April 2022 and October 2022 will see the highest volume of rate roll-offs for the year. With £925m in April and £949m in October, meaning that October will see the highest volume of product maturities for 2022 – a key revenue stream for advisers this year.

These peaks in remortgage opportunities for financial institutions, prompt the significance of having clear-cut, planned, client communication strategies in place to retain this business.

Making sure you’ve already contacted those deals coming up for expiry in April should be top of your firm’s to-do list. And, adopting technology to support these quick wins should be on your agenda for 2022 too.

Get in touch to hear more about how Eligible can help your firm in 2023.

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