A Homeowner’s Guide to the Real Estate Market in 2022

While other sectors have been hit hard by the pandemic, the real estate market has defied most forecasts. As if it wasn’t already a solid situation for those investing in property, the UK quickly rebounded from one of the worst economic performances and the government supported the industry with Stamp Duty Holiday.

But what will happen to the real estate market in 2022? Will property prices continue to rise? And what will be the impact of a rise in interest rates? First, it’s important to understand a few key economic metrics to gauge what’s likely to happen to the real estate market next year. Factors include:

Gross domestic product: This fell 9.8% in 2020 but is expected to rise 6% in 2022, following a 6.5% increase in 2021, bringing us back to pre-pandemic levels.

Unemployment: The fear was that unemployment would rise at the end of the furlough, however, the expected unemployment rate after the furlough will be around 5%, the upper end of the average 3-5%. This is good news, as falling unemployment supports a healthy real estate market.

Wages: An increase in the minimum wage and better tax relief for Universal Credit recipients returning to work, coupled with general wage increases, will support rental income levels.

Inflation: The government’s target inflation rate is around 2%, but the forecast for 2022 is expected to be double that, so that’s one of the only areas of concern. This is due to several factors, including a labor shortage, rising energy bills and rising food prices.

Interest rate: In January 2022, the Bank of England’s base rate was just 0.25%, making mortgage rates among the lowest on record. However, these rates are generally used to control inflation, so expect the era of ultra-low rates to end shortly.

Confidence: Good news generally influences buyers and sellers, so the positivity surrounding the economic rebound should continue to keep the housing market stable going forward.

House price growth

Continued good news in the sector means many forecasts are calling for house prices to continue to rise in 2022. Capital Economics suggests house prices will rise 2.5% in 2022, bringing us back to growth rates.” normal” pre-COVID. Meanwhile, Price Waterhouse Coopers (PwC) is more optimistic in its forecast, suggesting prices will rise 1% to 4% in 2022.

Real estate prices are expected to continue to rise due to:

  1. Equity levels are high
  2. Demand is greater than supply in many areas
  3. Wages rise, allowing people to borrow more money
  4. Mortgage funding remains plentiful and affordable, even with expected interest rate hikes
  5. Consumers’ desire to have the type of home they really want, which compensates for any lack of confidence in the economy.

It is important to remember that these factors vary by region. For example, prices in London have not performed as well as in the past. When the pandemic hit, demand fell relative to supply and mortgage borrowing tightened, especially for first-time buyers. And when those at the bottom of the chain can’t afford to offer that much, it tends to control prices all the way down the chain. From our experience, only your local expert agent can advise you on supply and demand, as it may even differ from route to route. It can also vary by property type – for example, one-bed apartments can be extremely popular in some areas, while in others it can be five-bed detached houses.

Rents are up – mainly

Rents have risen significantly since the second quarter of 2020, increasing by 2.1% in the second quarter of 2021. If we remove London from the figures, the average rent has risen by 5% year on year – a high in 13 years. However, this contrasts with the capital, where rents fell 3.8%.

Looking to 2022 and beyond, with inventory constraints similar to the landlords’ market, wage increases expected to continue at all income levels, and a strong recovery in the economy, rents are expected to continue to increase – great news for existing owners and new owners.

What do rising prices and rents mean for property owners and investors?

Forecasts can be useful in understanding what might happen in the real estate market and how the industry and other buyers and sellers will react, but it’s important to remember that these are only predictions. Regardless of what these markets say, there are always individual “deals” to be made; they may just take more time and diligence to spot them.

Like any financial business, the real estate investment market will naturally rise and fall over time, but for those who can invest for the longer term and “ride out” temporary downturns, having a property as part of your investment strategy investing can really help you achieve your financial goals.

However, in today’s world, as supply and demand are so area specific, simply buying any property on any street will not necessarily result in an investment. successful real estate, as it was in the 90s and early 2000s. . In fact, it’s quite the opposite – unless you plan carefully and take expert advice, it’s all too easy to end up with something that will end up costing you money, rather than to increase your wealth. It is therefore essential to seek advice from a professional local estate agent, a mortgage broker with experience in buy-to-let, a good legal firm and an excellent surveyor.

Our full Real estate market forecast 2022 covers the following in more detail:

• Price forecasts, including supply versus demand, equity levels and mortgage availability
• Rental forecast for 2022
• Trading levels – and is it a good time to buy?

Download your copy of Real estate market forecast 2022 today.

At Leaders Romans Group, we can help you connect with our real estate experts. If you would like advice or have specific questions regarding your property investment or any of our services, please do not hesitate to Contact us.

Penny D. Jackson