Investor Insights: Top 5 property market predictions for 2022
2021 was an outstanding year for the UK property market. Despite ongoing economic disruptions, property performed better than ever before, with record high house prices and the rental market outdoing all expectations.
With 2022 around the corner, we have taken a look at what is set to be another record breaking year and picked out our top 5 property predictions for the next 12 months.
The start of a period of rapid growth
2022 will mark the beginning of a five-year period of extremely fast growth in property prices according to the latest residential forecastreport from JLL. This will build on the progress made in 2022, and ensures thatinvesting in property in 2022is a savvy move for any investor.
To takeManchesteras an example, JLL anticipates that property values will grow 25.8% in the city by 2026 – far exceeding the rest of the country over that time. This follows growth of 8.5% in 2021 as recorded by the latestHometrack Cities Index, making Manchester one of the most desirable investment markets in the country.
Another market that is on the verge of huge growth is Preston, one of the UK’s most exciting up-and-coming markets which is enjoying billions of pounds of investment. We recently reported that Preston saw price growth of 21% in 2021 as per data from the Land Registry, Dataloft and the Department for Levelling Up, Housing and Communities – and there is no sign of it stopping there, making the North West city a prime location forUK property investment.
The return of London
London has for many years seen something of a decline in its housing market, but all indications are that it is on the rise again and is a location which should be of great interest to property investors.
Returning to the same JLL 2022-2026 report, we can see that almost 26% house price growth is expected in the next four years – putting London on a par with Manchester – and that rental growth will also be impressive at 16% over that same time.
This is important for investors as it means that not only can you expect high levels of capital appreciation once again by investing in London, but the rental demand is also returning to the city following something of an exodus during the early stages of covid-19.
Ronnie Garrett, Managing Director of Alliance Investments, says: “After many years, we are pleased to finally be able to recommend the London market to investors again. The future is bright for the capital’s housing market and investors can expect high returns by choosing to purchase in the city.”
Lack of supply in the future
The aforementioned house price increases will largely be driven by a lack of available supply. Nationally, the latest government figures show that there is an annual deficit ofup to 100,000 new homes, meaning that demand is going through the roof. This is affecting those interested in investing in property and those looking to rent.
Figures from Zoopla’s November 2021UK House Price Indexback this up, and lend more weight to the projections in the JLL report. According to the search engine’s report, the supply of new homes fell 9.5% in 2021 compared to the previous year. This led to a 16% increase in the demand for homes over the same period, and has caused annual house price growth of 7.1% on average across the country – or to put it another way, an average increase of almost £16,000 in a year.
There is no prospect of the available supply increasing enough in the foreseeable future for this situation to change, and so one of our top property predictions for 2022 is, particularly for those looking at investment property, is to anticipate further substantial price rises in the coming years.
The demand for space will continue
The ongoing Covi-19 situation continues to make people re-evaluate their life choices, one of the most important of which is where to live and what they want from their homes. With working from home becoming more popular, and showing no signs of going away anytime soon, many people have realised that more space is one of the most important considerations for them.
This has largely taken one of two forms: either a move to a larger apartment in the city centre, or a move slightly out of town now that the daily commute has changed for many.
Nadia Aghtarafi, Lettings Manager atAlliance City Living, explains the effect the former is having on the market: “One of the major trends from the second half of 2021 was people willing to pay a premium for a larger apartment, or to move into one of their own instead of sharing.
“The record rents seen in Manchester for studios, 2- and 3-bed apartments demonstrates this, as does the fact that there are only a few hundred apartments available in the whole city at any one time. This is a fantastic time to be a landlord in Manchester and other city centres with similarly booming demand.”
Mortgage rate increases
Something that seems guaranteed in the world of property in 2022 is a slight rise in mortgage interest rates being passed on by lenders. The UK base rate of interest had been held at an unprecedented 0.1% for a long time until the Bank of Englandraised it to 0.25%at the end of 2021.
Analysts are expecting further base rate rises in 2022 as the Bank tries to fight inflation, and these will inevitably have an effect on mortgage rates. Indeed, major high street lenders such as Barclays, Lloyds, Halifax and Nationwide have already announced interest UK mortgage rate rises on some products in anticipation of this move.
However, it should be born in mind that even another 0.5% rise in the base rate would leave mortgage rates well below what they were even 20 years ago – and, most importantly, far below the annual growth rate of house prices and rents.
Whether you are a homeowner or an investor, you are likely to see mortgage rates rise, but you should not be overly concerned. The gains on offer are substantially larger, and the higher rates will even offer advantages to those who can buy in cash or are able to remortgage in the near future.
2022 is set to be another highly impressive year for the UK property market. Growth predictions have never been higher, and a nationwide lack of supply means that this state of affairs is likely to continue in the long term as demand cannot be met.