What are the factors that will influence the housing market in 2022?
The disruption that 2022 will bring to the workplaces and to lenders’ offers is not over. The U-turn by the government and the calmer market conditions have not translated into better mortgage deals.
What is the future for real estate?
Mike Collins, a 17-year veteran in the finance industry, said that he expected more stability after a record year in 2021 for lending. Plus, there was the stamp duty holiday which stimulated 1.5 million home purchases in the UK. Many people decided to move because of the flexibility offered by these changes.
“Despite the current mess, it is clear that the changes made during the pandemic such as switching to hybrid working are here to stay. The people have had time to think about what they want in their homes .”
Costs are rising
It’s not surprising that inflation is at its highest point in 40 years and disruptions in all industries due to Brexit and Covid-19 pandemics, costs are on the rise.
We are paying way more for labour and materials than ever before, plus we have disruptions in the supply chain. Index linking, which is done to protect against the risk from underinsurance, has also gone through the roof as a result of changes in inflation and living costs.
This could indicate that people would rather stay put and convert their homes than move, given the high price of moving right now.
Consumers want to spend their money. After spending months in their homes, they have realized all the work that must be done. This has led to a surge in demand for labourers in the UK.
Aspiring homeowners are also reevaluating their life. They now work remotely and need an additional area to use as an office. They may have been able to save money and/or pay off some debt because they didn’t have any money to spend. They do have enough cash for renovations.
Prospective homeowners will be eager to find properties that have the highest energy ratings, as they are seeing their energy bills rise steadily. As minimum requirements, they will be looking for high quality tripled-glazed windows, cavity and/or walls insulation, and a well-serviced boiler.
Lockdown was a difficult time for people with limited or no outdoor space. Some people were forced to sell their homes and search for rural properties. At the moment, homes in close proximity to parks and green spaces are in high demand. Many are looking for opportunities to convert or extend their homes.
Deals and lenders
Buyers are always looking for the best deals on mortgages. Nationwide was the first major lender to raise fixed-rate rates, increasing its rate by 5.59% over the two-year period. It offered a comparable mortgage at 2.54% just a few months back. This is a more than PS880 monthly increase for a family with PS500,000 mortgage.
With the Bank of England expected to increase the base rate to 6% by 2023, I expect other lenders will follow their lead. This is why we can expect house prices to fall by as much as 10% next year in order to offset the rising interest rates. We haven’t seen this since 2008, when the economy was in a slump.