Drivers of Change

Last year was the busiest year for the housing market since the 2007, with activity levels unseen since before the Global Financial Crisis. This is according to Simon Leadbetter, Global CEO of Fine & Country, who adds that HMRC reported that the UK, just shy of 1.5 million sales took place during 2021, which is 43% higher than 2020 and an increase of 26% when compared to 2019 figures.

“During 2021 we saw the number of mortgage approvals and lending go up 15% and 29% respectively, compared to 2020, and activity levels remain brisk, even after the end of financial incentives provide by governments. Last year was a bumper year for the housing market and buyer demand is yet to let up at the start of 2022,” says Leadbetter. “The success of the country’s response to the Omicron variant and the lifting of COVID restrictions have increased positivity, and prospective buyers continue to evaluate lifestyles and ‘search for space’. Also, for many hybrid-working looks here to stay, which has provided buyers with a lot more freedom when it is comes to choosing their ideal location to live.”

As many start the year settling into new routines, Zoopla report that demand from apartment hunters outside the capital is at a five-year high. Demand within the capital is at its highest level since the market reopened in Summer 2020. Rightmove report new year demand is up 15% year-on-year and Zoopla has seen demand in the opening weeks of 2022 at 49% higher than the average witnessed between 2018-2021.

“Pent-up demand remains high, and a lack of available property to purchase means that buyer competition is nearly double that of a year ago. Best and final offers for property in sought-after locations are commonplace, and many are selling above asking price,” comments Leadbetter.

He adds that there are tentative signs that stock levels will start to improve in the coming weeks, with the number of home valuations in the first working week of 2022 up 44% on the same time in 2021. “Perhaps more usefully, given the country was in lockdown a year ago, valuations were up 48% on 2020. At present, an estimated 40% of buyers enquiring about a home have not yet put theirs on the market. So called ‘power buyers’, those who have money in their pocket or have already sold subject to contract, are in the best position to secure their dream property.”

With annual property price growth in or close to double digits in many areas, any influx of new stock to the market should help calm property price inflation. The latest data from Nationwide indicates annual property price growth in the year to January is 11.2%, the strongest start to a year since 2005. In the prime markets, annual price growth currently exceeds 10% in the North West, West Midlands, Wales and Yorkshire and the Humber.

While the demand in the housing market is currently very strong, Leadbetter says there are economic headwinds that could potentially dampen buyer’s appetites. “The International Monetary Fund (IMF) predicts the UK economy will grow by 4.7% over 2022, the strongest growth of any of the G7 industrialised nations. Balanced against this, inflation is expected to peak at 7.25% in April and take-home income is likely to fall in real terms by 2% over 2022, the biggest fall since records began in the 1990s. Concern for the economy has led to a 4-point drop in consumer confidence in January (GfK), compounded by energy price rises and planned changes to National Insurance contributions in April.”

He continues, “The Bank of England raised the base rate to 0.5% this month, but this is unlikely to have a significant impact on the market in the short term. Most homeowners are on fixed-rate deals and even at 0.5%, the base rate is extremely low by historical standards. With energy costs a significant element of current price rises, this may well turn the spotlight onto more energy-efficient homes, particularly for those seeking to upgrade or take their first steps onto the property ladder.”

Editors Notes:

Fine & Country specialises in the sale and rental of prime residential properties. The company is in over 300 locations worldwide including Hong Kong, South Africa and Australia. Fine & Country has won Best Estate Agency Marketing and Best International Estate Agency Marketing seven times in the past 10 years at the International Property Awards.