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Post-pandemic push: UK housing market reaches new highs

There’s no let-up in buyer appetite across the UK housing market, according to the latest figures, with the predicted post-pandemic dip still yet to materialise.

Another month, another house price index, and the latest Rightmove results show that things are still moving quickly in the country’s property sector.

In contrast to the ONS figures, Rightmove’s monthly indices examines asking prices rather than sold prices. It shows that prices have seen their biggest ever monthly increase, surging by 2.3% to £348,804 – a record high.

On an annual basis, sellers are looking for 9.5% more for their properties than this time last year. The good news in terms of stock levels is that seller numbers are up by 11% compared to February 2021. There’s also been an 11% rise in the number of people requesting estate agent valuations.

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UK housing market remains robust

The figures are a clear indication that the after-effects of the pandemic, and the drastic slowdown predicted by some, are yet to take effect. There is still plenty of competition among buyers and sellers, and people’s behaviours still appear to be influenced by the “new normal”.

Tim Bannister, Rightmove’s director of property data says: “The data suggests that people are by no means done with their pandemic-driven moves. Such a significant societal event means that even two years on from the start of the pandemic, people are continuing to re-consider their priorities and where they want to live.”

With news from Prime Minister Boris Johnson that the final restrictions will be lifted a month earlier than expected, there could be a knock-on effect sooner rather than later on buying and selling trends. Bannister believes that there is a new group of movers wanting to return to major cities and commuter towns.

“High demand and a shortage of available stock are supporting a rise in prices and a new record average asking price this month,” he adds. “The rising cost of living is undoubtedly affecting many people’s finances, especially those trying to save up enough for a deposit to get on the ladder or to trade up.”

Despite all this, though, demand appears to be rising across the whole of the country.

Recovery in London?

Appetite for London property has dipped in recent years, resulting in stalling house prices. Meanwhile, the winners in the UK housing market have been parts of the north, with the north-west especially experiencing a boom.

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However, Rightmove has noted the biggest annual rise in buyer enquiries in the capital compared to elsewhere in the market. Prospective buyers surged by +24% between February 2020 and February 2021 in London.

It has also experienced its biggest annual price hike rate since 2016. This could be a direct result of pandemic restrictions being lifted and attracted workers and city dwellers back to London.

Pressure is easing

One of the biggest challenges faced by the UK housing market in recent years is lack of stock compared to buyer numbers. This has contributed to house prices rising at a faster rate in some areas.

Ben Hudson, managing director at Hudson Moody in York, says that as soon as a property is listed, it flies off the shelf with interest from multiple buyers. This means a lot of homes are selling at above asking price, making accurate valuations even more difficult.

He adds: “The good news is we are starting to see the first signs of the pressure easing, and more traditional seasonal markets returning after two years of frenetic pandemic markets.

“We are going out to value more properties, and seeing more new listings come to the market for sale, and we are seeing signs of a busy, but more traditional spring season.”

By Eleanor Harvey

Source: Buy Association

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House prices in Scotland rise by more than UK average

House prices in Scotland rose by more than the UK average last year, with an 11.2% increase over the year to December 2021.

Analysis from the Office of National Statistics (ONS) found that the average house price in Scotland reached £180,000.

Across the UK generally, house prices increased by 10.8% over the year to December 2021, according to the UK House Price Index.

The ONS found that the average house price across the whole of the UK reached record levels in the month of December, with the average UK house price increasing by £27,000 last year, ending 2021 on a record high of £275,000, according to official figures.

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ONS head of Inflation Mike Hardie said: “House prices in the UK all reached record levels this month, with the average UK house price at £275,000 in December 2021, £27,000 higher than this time last year.

In Scotland the average house price increased by 11.2% over the year to December 2021, and while lower than the 12.1% increase in the year to November 2021, average price increases were recorded in all 32 local authorities across the country.

The largest increase was in Fife where the average price increased by 16.0% to £166,836. The smallest increase was recorded in Aberdeen, where the average price increased by 3.5% to £148,251.

Edinburgh remained the highest-priced area to purchase a property with the average price sitting at £312,459.

In contrast, the lowest-priced area to purchase a property was East Ayrshire, where the average price was £121,488.

Commenting on the house price figures in Scotland, Registers of Scotland (Ros) Business Development Director Kenny Crawford said: “The average price of a property in Scotland in December was £180,485, slightly lower than £183,876 reported in November 2021 which was the highest reported for any month since January 2004, from when Scottish data for the UK HPI was first available.

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“Over the year as a whole, from November 2020 to the end of October 2021, the number of transactions has picked up following the reductions caused by COVID-19 measures and cumulatively is now 67% higher than the previous year.

Figures in the current year to date are also 15.5% higher than pre-COVID-19 figures from November 2018 to October 2019.”

According to RoS figures detached properties showed the biggest increase out of all property types, rising by 16.7% in the year to December 2021 to £330,461. Flatted properties showed the smallest increase, rising by 5.9% in the year to December 2021 to £122,189.

A separate ONS report also released on Wednesday showed that private rental prices paid by tenants in the UK increased by 2.0% in the 12 months to January 2022 – representing the sharpest annual growth rate since February 2017.

Excluding London, private rents increased by 3.0% year on year.

Nitesh Patel, strategic economist at Yorkshire Building Society, said: “A key challenge in the current housing market is the lack of supply of homes for sale whilst demand continues to remain strong.

“For most of last year the stamp duty holiday had provided a boost but even after that ended prices have continued to rise. Low borrowing costs and a strong jobs market are key drivers but in the coming months a further deterioration in household finances may take some of the heat out of the market.”

By Stephen Mcilkenny

Source: Scotsman

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House prices rise again as strong demand continues: Rics

Demand from home buyers jumped last month showing that the market did not suffer winter blues, according to the Royal Institution of Chartered Surveyors (Rics).

Its latest report, for January, shows a net balance of 16% of respondents said they had seen an increase in new buyer demand, up from 9% in December, the strongest reading since the height of the stamp duty holiday in May last year.

However, the body points out this survey was conducted before the Bank of England’s decision last week to increase interest rates to 0.5% from 0.25% – a move that could put some off from buying a new property.

The survey reported that new instructions fell slightly, to a net balance of -8%, this indicator remained negative since April. Although there was a net balance of 3% for market appraisals, the first time this measure has been above zero since June 2021.

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The average time it takes to finalise a sale – from listing to completion – has now fallen to an average of sixteen weeks, down from seventeen weeks in September 2021 and the lowest since December 2019, indicating that sale speeds have nearly rebounded to their pre-Covid-19 normal. Sales volumes are also reported as remaining steady during January.

Over the next three months, new sales expectations from respondents improved with the latest net balance up to 22%, representing a ten-month high. When looking at the next year, sales were expected to improve by 24% of respondents.

House prices in January also saw no sign of letting up, with a net balance of 74% of respondents seeing an increase.

On a regional level, the most significant growth reported in property prices was focused in the North West and South East of England. All UK regions and countries are anticipated to see further increases in house prices over the year ahead.

Demand from tenants in the rental market also continued to rise, according to a net balance of 64% of respondents, representing the strongest on record since 1999, while landlord instructions remained in decline according to -15% of respondents.

Given this ongoing mismatch between tenant demand and property supply, a net balance of 59% of respondents said they expect rents to increase over the next three months, an increase on 54% taking this view previously. Over the course of next year, rental prices are expected to rise by around 4% on average across the UK.

Rics chief economist Simon Rubinsohn says: “The increase in new market appraisals is an encouraging signal that more supply may be funnelled onto the market over the coming months, but it remains to be seen whether any uplift in this area is sufficient to match the resilient trend in demand.

“That said, there is an inevitable question mark over the impact of rising interest rates allied to the jump in the cost of living on homebuyer sentiment.”

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“Notwithstanding these developing themes, for the time being the signals on the outlook for both prices and rents remains a little worrisome with the twelve-month RICS indicators for both at, or near, series highs.

“Moreover, this pattern is also being reflected in the metrics designed to capture the trends looking slightly further out.”

Shawbrook Bank sales director Emma Cox says: “2022 is already proving to be a runaway success for those looking to sell.

“House prices are remaining at the record highs we’ve come to expect in the past 18 months and a lack of supply is underlying a sense of urgency up and down the property chain.

“However, a long overdue shake up could be on the horizon with Michael Gove at the helm of housing policy.

“The highly anticipated 12 step levelling up agenda announced last week has committed to improving local infrastructure, transport links and introducing a Decent Homes Standard for renters.

“These are positive steps for the market – both for current and prospective homebuyers – and if Gove’s words turn into actions we could see a shift both in property hotspots and homeownership figures.

“For now though the market is acutely aware of the rising cost of living and a second consecutive increase to interest rates which will have a knock-on effect on mortgage borrowing.”

Paragon Bank managing director, mortgages Richard Rowntree adds: “The UK’s private rented sector is facing a stock crisis and supply is failing to keep up with demand, leading to rental inflation and intense competition for rented homes amongst tenants.

“With the new flow of property for sale stilted, it’s unlikely this issue is going to ease any time soon.

“It’s important that government policy considers all tenures of property, not just owner-occupiers, and considers the importance of maintaining a healthy and vibrant rental sector.

“If rental inflation continues at current rates, many people could be priced out of the rented sector, as well as homeownership.”

By Roger Baird

Source: Mortgage Finance Gazette

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House prices hit another record high as demand surges

Demand for property has soared by 49% so far this year compared to the corresponding periods in 2018 – 2021, rivalling record demand seen during the stamp duty holiday, according to the latest Zoopla December HPI, released today.

The surge in demand has pushed up house prices to an all-time high, with the average price of a home hitting £242,000 in December, up from £216,500 at the start of 2020, the data shows.

According to the property portal, prices for houses (terraced, semi-detached and detached) now average £289,500, while flats average £175,700 – up 8.8% and 2.2% respectively year-on-year.

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Demand for flats is on a sharp upward trajectory for the first time in several years, with demand outside London hitting the highest level in five years as relatively modest price increases help reignite the popularity of flats amongst buyers

Meanwhile, demand for family houses outside London is four times higher than the five-year average.

Supply appears to have turned a corner as total stock of homes for sale is 44% down on five-year average, a marginal improvement compared to the 47% decline recorded at the end of last year.

Strong buyer demand in the market pushed annual price growth to 7.4% in December, down from 7.7% in September, but still marking one of the highest rates of price growth since 2014

Geographically, the suburbs remain in the highest demand with Thurrock (Essex), and the suburbs of Birmingham, Glasgow and East London (Barking & Dagenham) all topping the list of most sought-after areas.

But despite recent increase, house price growth is predicted to slow as the housing market returns to more normal market conditions in 2022.

Grainne Gilmore, head of research, Zoopla, commented: “The effects of the pandemic on the housing market cannot be underestimated. Even after nearly two years, the pandemic-led ‘search for space’ is one of the factors creating record demand for homes this month. The market is also being boosted by office-based workers re-thinking where and how they are living amid more hybrid working models. But in some cases, as offices re-open, some demand is flowing back into city centres.

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“Couple this trend with the return of international demand and the more modest prices rises in flats compared to houses over the last two years, and it’s clear why we are now seeing record-high spike in demand for flats outside London, and the highest rate of demand for flat in the capital than at any time since the end of the first lockdown.

“Just like much of 2021, the number of homes available for sale is lower than typical levels, but there are signs that the imbalance between demand and supply is starting to ease. As more potential sellers are able to find a home to move to, this will spur more supply in the weeks and months to come.”

Industry reaction:

Nick Leeming, chairman at Jackson-Stops, said: “The end of 2021 was characterised by a countryside renaissance that showed no signs of abating, with demand primarily driven by a race for space which surpassed all expectations at the beginning of the year. However as today’s results show, demand hasn’t only been limited to those seeking more space in rural locations. Demand is also rising across our cities as people once again return to offices and seek out cultural and social amenities including access to theatres, restaurants and museums.

“In London we have noted an uptick in homeowners who moved out to the countryside at the start of the pandemic, but who missed the city and have now returned. To put that in perspective, one of our London branches sold 21% more properties in 2021 than the previous year – with popularity across the spectrum, from classic pied-a-terre apartments through to large family homes.”

Tom Bill, Head of UK Residential Research at Knight Frank commented: “Demand has been unrelenting since the UK property market re-opened in May 2020. Cheap finance, high volumes of accumulated savings and a desire for more space and greenery have fuelled activity, none of which will disappear overnight.

“Apartments are also moving back onto the radar of buyers as lockdown restrictions are lifted, which has created a temporary sweet-spot of extremely high demand. As interest rates normalise, demand will calm down without going into reverse. The employment outlook for the UK is positive and while inflationary pressures are lingering longer than most people would like, there is no sense they will be permanent.

“The other factor that will usher in more normal conditions is rising supply. As Covid restrictions begin to feel irreversible, supply will increase and apply the brakes to the gravity-defying price growth seen over the last two years.”

By MARC DA SILVA

Source: Property Industry Eye

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House prices will continue to rise, says property expert

Demand will outstrip supply as house prices continue to rise, according to a local property expert.

Keith Moseley, the owner of X-Press Legal Services Staffordshire and West Midlands, predicts another lively year in the sector.

However, he says, it’s not all bad news, with these factors supporting a resilient market, complemented by the continuation of many government-backed schemes which will support first-time buyers.

He said: “Traditionally the housing sector, especially throughout the West Midlands, has struggled with those taking their second step on the property ladder with not enough equity in the first property being sold or lending restrictions making a move upwards financially unrealistic. This in turn starves the first-time buyer market. But there are a number of incentives available.

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“A government backed mortgage guarantee scheme with a five per cent deposit will be available until December from participating lenders and the Help to Buy Equity Loan is available until March 2023.”

Mr Moseley added that the rise in monthly rentals has also influenced the first-time buyer market, and hopes that as the economy and employment market picks up, consumers throughout the Midlands will be encouraged to take those first steps onto the housing ladder.

He also predicts that the property market will continue to be resilient in 2022 with prices rising as housing demand still outstrips suitable supply, including across the Midlands.

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The property expert explained: “The property sector is so important to the UK economy due to the enormous secondary supply chain of surveyors, builders, electricians, plumbers, joiners, carpet fitters, glazing suppliers and other trades involved in property development. The knock-on effect of the creation of more housing stock shouldn’t be underestimated.”

Mr Moseley added that 2022 should see the property market operating at a steadier pace as transactions are not influenced by external factors such as the stamp duty holiday.

He expects the market to begin gathering momentum again in January and a spike in activity following the Easter weekend which tends to be one of the busiest times of the year for UK house moves.

By Eleanor Lawson

Source: Express & Star

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Annual house price growth escalated to 10% in November

The average house price in the UK in November rose by 10% year-on-year, continuing the 2020 growth trend up from 9.8% the previous month.

According to the latest Office for National Statistics house price index, average house prices in November came to £271,000, which is £25,000 more than November last year.

Previous reports showed that annual house price growth has only broached 10% on three other occasions last year. In June 2021 annual house price growth was 13.5%, in August annual house price growth was 10.3% and in September it was 12.7%.

Wales reported the strongest average house price growth at 12.1%, with the average house price in the region pegged at £200,000. This is down from 14.4% in October.

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Scotland’s house price growth was 11.4% and the average house price was estimated at a record level of £183,000. This is slightly up from 11% in October.

Northern Ireland’s house price growth was 10.7% and average house prices came to £159,000. This is the cheapest place in the UK to purchase property.

Within England, the South West had the highest annual house price growth with average prices growing by 12.9% in November, which is up from 10.8% in October.

London had the lowest annual growth at 5.1%, which is a decrease from 6.7% in October. It still remains the most expensive place to purchase property in the UK

End of stamp duty hasn’t dampened demand

Kevin Roberts, director at Legal & General Mortgage Club, said that the figures showed that the end of the stamp duty holiday in September had not dampened demand in the housing market.

He explained: “Buyers are still being influenced by mortgage rates that remain low, but also the ongoing impact of the Covid-19 crisis. Many are continuing to take the opportunity to move, whether it’s to find larger properties, or those with home office space or a garden.”

He added that despite high demand levels and little change in housing supply the trajectory of the housing market in 2022 was hard to predict.

Roberts said: “Growing inflation and potential further base rate rises in the near future, mean the landscape is looking increasingly complex. Many borrowers could benefit from speaking to an adviser, who will be able to help them navigate the year ahead.

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“Doing so could help them find a new deal on their mortgage, particularly if their fixed rate is due to end soon and ensure their mortgage repayments remain fixed for the near future.”

Tomer Aboody, director of property lender MT Finance, said that the increase in house prices in November came off the back of cheap mortgage rates, return of high loan to value mortgages and impact of changing working habits meaning demand for space has grown.

He said: “Trying to manage this continued surge in prices, which is in danger of stretching beyond the means of many would-be buyers, will be on the government’s mind, along with rising inflation. Higher interest rates are a certainty in order to manage this.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, agreed that higher interest rates could be on the horizon, noting that there was further speculation that Bank of England will raise interest rates by 0.5% at its February meeting.

He said that this would counter rising inflation, but it remained to be seen what impact this would have on buyer confidence.

Harris explained: “Despite the global pandemic, the housing market was able to thrive last year and there are still those who have not yet made their purchase. Squeezed affordability would be an issue, preventing first-time buyers in particular from getting on the ladder, but the Bank will be mindful that as we come out of a pandemic, a succession of significant rate increases could be extremely damaging to the wider economy.

“Low mortgage rates have been one of the contributing factors to the housing boom and although some lenders are tweaking mortgage rates upwards on the back of higher money market rates, pricing remains competitive.”

Written by: Emma Lunn

Source: Your Money

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House growth continues in the region

House prices rose by up to 12 per cent in 2021, although they’re anticipated to moderate to about three per cent in 2022, according to Michael Williams, a partner at Morris, Marshall and Poole with Norman Lloyd based at Aberystwyth.

“We’ve seen record sales throughout Powys, Ceredigion, Shropshire and Gwynedd over the past year amid a significant growth in house prices throughout the region,” he said. “We anticipate growth to moderate to around three per cent in 2022, even with the Bank of England base rate increase to 0.25 per cent in December.

“Demand from house buyers in the area has been outstripping the supply of housing stock. However, following Christmas and new year we’ve seen a stepped increase in homeowners wanting to put their properties on the market.

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“It’s been an encouraging start to the year. Many homebuyers are looking for larger properties, principally because they are spending greater time at home for work and leisure following the pandemic.”

He added: “Our advice to anyone thinking of selling their home is to seek a valuation from their estate agent and place it on the market. Prices have risen and demand is there. Combine that with anticipated inflation and base rate rises and now is the time to consider a house move, whether buying or selling.”

According to the Guild of Property Professionals, which Morris, Marshall and Poole with Norman Lloyd is a member of, an estimated 1.3 million residential property transactions will take place in the UK during 2022/2023 – eight per cent higher than the long-term average.

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This is set against a private housing stock turnover of around 3.5 per cent in Powys and Ceredigion in 2021 and four per cent to 4.49 per cent in Shropshire during the same period.

The average rate of price change in Powys was 12 per cent, with the average house price at £216,998 compared to Shropshire which saw a 16.9 per cent increase and an average house price of £255,156. This equates to an average house price increase of between £21,600 and £22,700.

Demand for homes in towns ranging from Newtown and Welshpool, to Aberystwyth and Machynlleth, Llanidloes and Rhayader, and Oswestry continues to rise.

“There’s unlikely to be any further changes to the Land Transaction Tax in Wales or Stamp Duty Tax in England. And so those who have held off selling their homes should consider their options now before any Base Rate rises,” added Mr Williams.

By James Pugh

Source: Shropshire Star

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Average property price estimates reveal an intriguing picture

In the world of surveying, common questions abound and are always being asked. ‘What is going to happen to UK house prices?’ tends to be the most common and the most general, and the answer is always, ‘We just don’t know’.

The future is not yet written and a valuation is always taken at a moment in time, and is always likely to be different at each moment.

However, what we do have as a business is a clear view on what has happened and a raft of data to give us an idea of the direction of travel that we have seen, and by viewing this, you’re likely to gain further info to form an opinion on where the market might be going next.

To that end, we recently collated average house price data for all the regions we have been active in over the last 14 months. From October 2020, for all English regions plus Scotland, Wales and Northern Ireland, we can track the average property value based on the estimate sent to us by the lender concerned when they instruct us.

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The product used is our standard mortgage valuation and all lenders/firms/surveyors are included in our data. That final point is worth emphasising – it is our data and is unique to us, but it by no means covers every single transaction that has taken place during that time and should therefore be treated in that context.

It may however outline where house prices have come from, where they most recently arrived at, when they might have peaked (if they have done), although again this does not mean we can suddenly predict what might happen in the future.

To start with, let’s look at the average estimated price for the UK as a whole – back in October 2020, according to our data, this was just over £305,000, however by December 2021 this had increased to just over £337,500, representing a 10.5% increase.

I suspect there are few shocks to be had in reading this. Most of the house price indices – and we are certainly not a sector short of these – will have reported along similar lines during the period, with average increases being in the region of 8-10% for the average UK property.

Of course, this is a notional property in and of itself, and the UK is incredibly regionalised in terms of what happens to prices. Our data, as mentioned, is broken down into 11 regions, and over the same time period (October 2020-December 2021) it may surprise you to learn that the region with the highest inflation is Greater London.

It has gone from an average price of just shy of £590,000 to £718,000, representing close to a 22% increase. In much of the other house price data I have seen, certainly central London prices appear not to have increased by anywhere near the same levels as other regions; in fact it tends to be quite lower. However, this is a greater London region which might go some way to showing why it’s a heftier increase.

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Conversely, it is the North East which currently sits bottom of our inflationary table, up only 0.8% over the period from just over £232,000 to £234,000.

Again, this appears to go against the grain slightly in terms of regions deemed to have seen bigger inflationary rises. From what I have seen, the larger increases appear to have been in regions such as Wales, the North, Scotland, etc.

Our data shows double-digit house price inflation in Wales (15.14%), the North West (12.84%), Scotland (11.39%), and Northern Ireland (10.96%), while the East Midlands (9.14%) and East of England (8.91%) are not too far behind either.

The rest of our regions are made up of the South East (7.16%), the South West (5.9%), and the West Midlands (2.05%).

Again, these figures might be surprising to some, but at the top end of the scale, they certainly seem to be in keeping with many other indices and the ‘mood music’ around what prices are doing.

Interestingly, during the time period, only one region – Scotland – had its peak average price in the last month covered, December 2021. All others had ‘peaked’ prior to that – one region in September 2021, seven in October 2021, and three others in November 2021.

That seems interesting in itself, given the stamp duty holiday finished in England at the end of September 2021 and yet prices continued to peak after that.

Admittedly, they have now come off that peak and may continue to do so. It’s therefore entirely plausible that house prices might plateau during the rest of the year, or merely inch up again following that slight drop-off.

What we can say is that the UK continues to suffer from a shortage of property supply, coupled with strengthening demand which looks unlikely to peter out. Lenders want to lend, many people want to move/buy, and they outstrip the current property numbers available.

This basic law of economics tends to see prices, at the very least, trending slightly upwards. It will be interesting to see if this is how the market does play out through the year ahead and we will certainly review the data we collect to track its progress.

By Simon Jackson

Source: Mortgage Introducer

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Room for growth: UK housing market will continue ‘its upward climb’

Residential property prices ended 2021 at a record high with annual growth at its strongest in 15 years, and yet there appears to be plenty more room for growth in 2022.

The average price of a home hit £254,822, an increase of almost £24,000 compared to the previous year, according to Nationwide. In cash terms it is the largest yearly rise on record.

Prices rose by 10.4% in the 12 months to December, up from 10% in November, owed in part to the low supply of homes on the market.

Average prices hit a year-high of £254,822 in December, marking a £23,902 rise on the same month last year, while they were 1% higher month-on-month.

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“Prices are now 16% higher than before the pandemic struck in early 2020,” said Nationwide chief economist Robert Gardner.

Wales was the strongest performing region, with house prices up by almost 16% year-on-year. London recorded the weakest rate of growth at 4.2%.

The South West was the strongest performing English region, with annual price growth of 11.5%, the largest calendar-year increase in the region since 2004.

Industry reaction to the latest Nationwide House Price Index: :

Iain McKenzie, CEO of The Guild of Property Professionals, said: “The property market ended 2021 on a high, and it’s incredible to think that average house prices have soared almost £24,000 this year.

“This was the year that Britons took stock and decided it was time to find their dream home, and the trend shows no signs of slowing.

“Mortgage approvals are still well above pre-Covid levels, and with demand outstripping supply, prices are still being pushed up.

“We expect 2022 to start the same way, with fears over the Omicron starting to subside. Buyers will have one eye on soaring inflation, but the housing market continues its upward climb.”

Nicky Stevenson, managing director at Fine & Country, commented: “To close out the year at an all-time high on a wave of double digit annual growth sums up what has been an unstoppable rally that has surprised at every turn.

“Earlier this year, the performance of house prices was being described as a ‘mini-boom’ but the market has substantially outgrown that moniker now. The rally still hasn’t run out of steam, with buyers in December shrugging off the rise of Omicron and a rise in central bank interest rates.

“There are two main headwinds on the horizon, as Covid fears begin to ease. The first is inflation and the unpredictable pace at which the Bank of England will raise rates. Given property transactions are relatively slow affairs, this is one of the more difficult nettles to grasp for buyers who are stretching their budgets and trying to plan ahead. This affects those buying at the top end of the market as much as it does first-time buyers.

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“The second is consumer confidence. In the shadow of Covid, the UK has dodged an economic day of reckoning so far, largely thanks to government support, but there’s plenty of uncertainty left to navigate in 2022 from employment prospects and wage inflation to new Covid variants and rises in the cost of living.”

Lucy Pendleton, at estate agents James Pendleton, said: “December has capped off an extraordinary year that will go down as one of the market’s outliers. All parts of the economy seemed to be on manoeuvres in 2021.

“It was the year that policymakers kept pouring fuel on a fire that was already raging, London’s bellwether housing market consistently trailed the rest of the country and first-time buyers refused to lose interest despite soaring prices.

“You almost never see these three trends together but nothing surprises us anymore. It was very difficult to foresee any of this.

“For starters, the pandemic caused the so-called ‘race for space’ which was impossible to predict. Its legacy was that many buyers never got to enjoy the stamp duty discount because prices rose so fast that house price appreciation quickly eclipsed the tax break.

“It’s unlikely, armed with hindsight, that the government would intervene in this way and on that scale if it had its time again.

“Strong inflation would normally prompt an exodus of first-time buyers, particularly as interest rates would normally be on the march as well. That didn’t happen. The cost of borrowing remained mercifully low while the price of everything else took off.

“This delicate status quo can’t last forever and that’s what experts are watching as we head into 2022. New blood is crucial to the housing market and if December’s interest rate hike by the Bank of England indicates the direction of travel, wage increases may not be enough to counteract higher rates next year.

“Consolidation has to be on the cards but weaker performing regions like London could buck the national trend. Weaker affordability on average has held the capital back in terms of annual growth this year but wage increases and returning interest from international buyers next year could turn that trend around.”

By MARC DA SILVA

Source: Property Industry Eye

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Hot Housing Market to Normalise Next Year: Zoopla

UK house prices have reached an all time high according to a regular monthly assessment of the market, although 2022 should see a buoyant market rationalise amidst increasing mortgage costs.

Zoopla’s monthly House Price Index revealed strong buyer demand and lower housing stock volumes have boosted average house prices by £16K in the last 12 months.

This gives a 7.1% rise in average house prices, down from 7.6% in August.

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Zoopla says buyer demand is currently seen to be easing in line with seasonal trends, but they anticipate it will build sharply again after Christmas ahead of a moderation.

Rising household equity, coupled with movers looking for additional space, will underpin activity – delivering new supply, and demand – into 2022 said Zoopla.

Nationwide – who conduct the UK’s leading house price measurement – said annual house price growth increased slightly in November to 10.0%, with prices going up 0.9% month-on-month.

“Underlying activity appears to be holding up well. The number of mortgages approved for house purchases in October was still running above the 2019 monthly average. Early indications also suggest that labour market conditions remain robust, despite the furlough scheme finishing at the end of September. If this is maintained, housing market conditions may remain fairly buoyant in the coming months,” said Robert Gardner, Nationwide’s Chief Economist.

But Zoopla says the market should normalise in 2022 following the hefty gains in prices seen over recent months.

“The speed at which the market is moving will start to normalise next year,” said Zoopla.

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A significant potential headwind to further house price gains comes in the form of higher mortgage interest rates as credit markets anticipate a higher Bank Rate at the Bank of England over coming months.

“New mortgage rates already have jumped to reflect expectations that the MPC would hike Bank Rate,” says Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics.

The Bank of England last week hiked interest rates by 10 basis points to 0.25% and economists expect further rate hikes will follow in 2022.

Whether the next rate comes in February or May is up for debate, but money markets show investors are anticipating Bank Rate to go to 1.0% by the time 2022 is done and this will be reflected in mortgage levels.

20% of the stock of existing mortgages are on variable rates, making them the most ‘at risk’ category.

“Most households which refinance their fixed-rate mortgage over the coming months won’t end up paying any more in interest, given that most of them obtained their mortgage five years ago, when rates were higher,” says Tombs.

Pantheon Macroeconomics say they forecast the Bank of England will raise interest rates to 0.50% in May, rather than in February as markets presently expect.

Written by Gary Howes

Source: Pound Sterling Live

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