Property Predictions and Autumn Budget Update

How much could change for the property market next year? And what does the recent budget announcement mean for you?

As we all know, Britain’s property market has been sizzling since it reopened, stoked by Chancellor Rishi Sunak’s stamp duty tax holiday.

The market is still adjusting to the end of the stamp duty holiday and property prices are at record highs, boosted by the short supply of stock. But how much could change in 2022 and what do the recent Autumn budget announcements mean for you, whether you're an investor, landlord, buyer or seller...

Will the cladding policy changes help first-time buyers?

The chancellor confirmed £5 billion funding to remove unsafe cladding from the highest risk residential buildings. He confirmed that this would be partially funded by a residential property developer tax. This could be good news for first-time buyers – many of whom are stuck in unsaleable properties, affected by unsafe cladding. Sunak also confirmed £24 billion to go towards investment in housing activity – including £11.5 billion towards affordable homes, which is great news for new buyers entering the market.

What will happen to inflation and interest rates?

There was little mention of inflation and interest rates in the Autumn Budget. If there were changes, they would have been announced at the Bank of England’s Monetary Policy Committee meeting but the interest rates are held at 0.1%. Those of you on the fence about moving (or wondering whether to leave it to the New Year) should make the most of the fantastic borrowing opportunities available to you now. It's still a brilliant time to move. 

Have green home grants been introduced for homeowners?

The Government announced that they are offering 5,000 grants to replace gas boilers with low-carbon heat pumps. The move may hit customers who have traditional gas boilers installed, so this is something for homeowners and landlords to note. The change is designed to encourage homeowners to us more expensive, but more eco-friendly options. If you'd like to learn about the multiple ways to make a property better for the environment, head here.

What does 2022 hold for the property market?

2021 has been a record year, with sales set to exceed highs of 2007 and over £473 billion of new sales agreed

According to Zoopla, the property market is set to record the strongest year for sales and house price inflation since 2007. In fact, this year saw £473 billion of new sales agreed, which is 95 billion higher than 2020. This could be a result of the nationwide re-evaluation of housing needs, low mortgage rates and the additional boost from the extended stamp duty holiday. 

Record- low mortgage rates could increase to 3% by end of 2022

Low mortgage rates have become an important part of the housing market over the last few years - and have even bolstered higher house prices. Buyers entering the market have become used to low mortgage rates which have ranged between 2% and 3% since 2015. The general consensus is that interest rates will increase in 2022. Zoopla predicts they will have risen to 3% by the end of next year - the highest rate since 2015 but still historically low.

Will house price growth increase in 2022?

"In terms of 2022, we expect HPI to be around 3.5%, but there is potential that it could come in a bit higher if supply fails to improve..." says David Plumtree, Group Estate Agency Chief Executive at Countrywide’s parent company, Connells Group.

If we look ahead into 2022, mortgage offerings will remain competitive, even if rates increase slightly. Continued scarcity of homes for sale could remain well into 2022, adding pressure to prices. However, the general trend over the last few months of 2021 has signified a slight slowdown of price growth where new sales are being agreed. It will be interesting to see how this plays out in Q1 of 2022.

House price growth will be greatest in the North West and Wales (+4%) and lowest in London (+2%).

According to Zoopla, the fastest-growing markets are expected to be the North West (4%) and Wales (4%). Unsurprisingly, London is expected to deliver slightly below-average growth of 2%, where affordability factors such as higher living costs and increased mortgage rates will limit growth in the short term. This is something for landlords and investors to consider when purchasing property for capital growth as well as yield.

People will continue to desire more space in 2022...

People place a higher value on their homes since lockdown. As we all continue to work in a hybrid model of home and office, people are re-evaluating their property needs and often choosing to upsize or move to greener spaces. These changing property needs have resulted in more homes being sold in 2021 than in any year since 2007. These lifestyle changes, sparked by the pandemic, will likely affect housing decisions and choices as we move into 2022.

The opportunity for sellers and investors will continue well into 2022

"In terms of 2021, we have seen double-digit growth and a fair chance it could be as high as 12% – fuelled by strong buyer demand and a severe shortage of available stock." says David Plumtree, Group Estate Agency Chief Executive at Countrywide’s parent company, Connells Group.

2021 has offered fantastic opportunities for sellers and investors and these look to continue well into 2022. Homeowners have seen huge increases in the value of their homes since 2020 and these profits will potentially bring more sellers into the market in the new year. Investors who added value to properties in the short term have also benefitted from recent house price growth. The main blocker to sales progressing will probably stem from unrealistic seller expectations on pricing. The best means for a sale to progress quickly and effectively is to use a professional and experienced estate agent. 

Final thought

The housing market continues to defy expectations. The lack of stock, high demand from buyers and the brilliant mortgage rates have pushed up house prices. Although property prices may not increase at the same pace as the last 12 months, they will increase in 2022 unless we see an increase in stock. However, one thing the last year and a half has taught us, is that the housing market never quite goes according to plan...