New year, same request? Predictions for the real estate market in 2022
To this end, the main real estate agents and notaries, MOV8 Real Estate, have put together their forecast for the real estate market this year, and what they see as the key drivers and challenges the sector will face in 2022.
Small recap of the past year
2021 has been an exceptional year for the Scottish property market by all accounts, with the effects of COVID-19 in sight and a continuing shortage of supply of new properties entering the market relative to demand. buyers. This has put considerable upward pressure on prices as the Scottish market experiences significant annual increases in house prices and reduced time to sell.
2021 also saw the end of two major tax breaks: the Land and Buildings Transaction Tax (LBTT) in Scotland and the Stamp Duty Land Tax (SDLT) in England. These tax breaks were meant to boost activity in the real estate market, but it turned out that the real estate market didn’t need a lot of stimulus in the first place. The unprecedented pressure to ‘move forward’ with real estate transactions to ensure they ‘beat’ these deadlines has put extreme pressure on real estate lawyers across the UK and left many them unable to cope.
At the end of the year, there has been the traditional seasonal downturn for properties entering the market in the winter, however, demand remains high during this time with buyers having fewer choices and low inventory levels. You don’t have to wait until spring to bring your property to market, demand is constant throughout the year and there is much less competition for your property in the winter.
So, as we move towards 2022, here’s what the experts at MOV8 predict that real estate buyers and sellers can expect in the coming year.
The impact of COVID-19 on the real estate market
The rapid rise of the Omicron variant is omnipresent in the news and will undoubtedly have an impact on our daily life until 2022, however, will it have a negative impact on the real estate market?
As of March 2020, it was predicted that the initial foreclosure, mass uncertainty over employment prospects and the economic damage caused by the pandemic would hurt the real estate market and that there would be a sharp drop in real estate transactions and a falling real estate prices. It couldn’t have been more wrong!
The experience of MOV8 after the team’s foreclosure in 2020, demand for properties skyrocketed, especially for homes and properties with outdoor space. This image has remained constant ever since.
Rightmove’s December Home Price Index showed appraisal requests through their website were up 19% from the same period last year. As an appraisal request is the first step in selling a home, it indicates market confidence for the start of 2022.
Will supply catch up with demand?
The low supply of new properties entering the second-hand market combined with very high demand from buyers has been a constant theme throughout 2021 and this is expected to continue into 2022.
The new real estate construction sector is a big part of the market, but COVID-19 has hit this sector hard, with the supply of building materials and significant staff shortages due to the disease, which means that a Below-average number of new construction properties were released to the market in 2021, and again, this is expected to continue into 2022.
However, confidence in the real estate market remains strong and the market has weathered one of the most earthquake events in living memory for the past two years. Restrictions on our ability to spend, including less socializing and vacations, have allowed more people to save to buy a home. With home prices rising in 2020 and 2021, existing homeowners have seen their home equity rise, which has helped them move up the ranks.
Will prices drop in 2022?
There is no reason to predict that the real estate market will cool down in 2022 compared to 2021. It might not be the best news for real estate buyers trying to gain a foothold on the ladder, but it is is good news for real estate sellers.
Zoopla recently predicted an overall increase of 2.5% in Scottish property prices in 2022, while Rightmove predicted a 5% increase in UK-wide sale prices.
There will always be local variation, and areas with well-rated schools will continue to benefit from high selling prices, as well as areas that offer more outdoor space and are within switchable distances from towns and villages.
Economic factors and the real estate market in 2022
Inflation and rising interest rates
The latest report from the Office of National Statistics (ONS) noted that the UK Consumer Price Index (CPI) reached 5.1% in the 12 months leading up to November 2021.
Rising inflation makes consumers less well off and more likely to tighten their belts. This affects the ability of people to save money, including a deposit for a property purchase.
The Bank of England, in December 2021, also announced an increase in the bank rate (often referred to as the “base rate”) for the first time in three years. Anyone with a variable rate or variable rate mortgage will likely see their monthly mortgage payment increase.
Increased monthly mortgage payments and less attractive mortgage deals, especially longer-term fixed rates, will deter some buyers. However, given the unprecedented demand in the Scottish property market, there is still a long way to go before this has a significant impact on property prices – the market is so competitive it can currently afford a slight decrease in the number of buyers. who can afford to buy.
Global outlook for the real estate market in 2022The team of MOV8 are convinced that the real estate market will remain buoyant in 2022.
The fundamentals underlying the market in 2021 are unlikely to change drastically – lack of supply, huge demand from buyers, affordable mortgage products, reduced ability to spend money, increase in working from home, need for money. outdoor space and a desire to treat yourself to something good during a difficult time.
All of these factors combine to create a highly competitive landscape for property buyers and a very healthy market for property owners and sellers.