UK Property Market in 2022
UK house prices have continued to rise strongly throughout this year, increasing by 5.6% in the first six months and driven by elevated levels of demand. It’s expected that by the end of the year, the UK will see prices rise by a total of 9.0%.
Savills believe that while transactions and thus price growth will continue into 2022, it’ll be tempered by the exceptional growth we’ve seen this year – especially if interest rates start to rise sooner than expected.
This will lead to a ‘soft landing’ rather than a dramatic price correction over a short period of time.
It’s expected that during 2022, the Midlands and the North of England will show the strongest price growth, mainly driven by their greater capacity for growth.
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UK Rental Market in 2022
With news breaking in 2021 that renting was officially cheaper than buying in terms of monthly payments, the rental market has continued to grow from strength to strength.
JLL expect that rental prices will grow by 9.5% by 2025, as the UK market continues to grow alongside increased demand.
This is following on from exceptional price rises in a number of UK regions, particularly the East Midlands, which saw 8% over the last year – the leading growth in the country.
With the UK economy faring better than expected in terms of unemployment and GDP growth, the UK property market forecast suggests that this rental growth is sustainable going forward.
UK Supply & Demand
Demand from buyers for UK property continues to rise while supply has hit an all-time low.
Sales agreed year-on-year has risen by over 30% across the UK, while exchanges have also increased by 55% – a clear signpost of how quickly demand is outstripping supply.
According to TwentyCi, estate agent listings have decreased by 50% to normal levels, while 530 UK districts have housing stock levels below two month targets.
In terms of tenant demand, 48% of the Derby market is under-35, highlighting the potential for investment returns from a young professional market that is increasingly likely to rent.
UK Economic Performance in 2022
According to the British Chambers of Commerce, UK GDP growth has been so strong over Q2/Q3 of 2021 that the UK economy is expected to return to pre-pandemic levels by Q1 2022.
This will be followed up by 5.1% growth over the remainder of the year, mainly driven by consumer spending and the release of pent-up demand.
Business investment is also forecast to rebound in 2022, supported by the boost immediately following the re-opening of the economy. BCC have warned that this boost could slow in 2023 if corporation tax increases.
Finally, BCC have warned that recovery will likely be ‘uneven’. Sectors most hit by the pandemic – catering and hospitality for example – will only return to pre-pandemic levels in Q2 2023. In contrast, manufacturing as a sector is expected to return to pre-pandemic levels by the end of 2021.
Strong Regional Performance
Savills predictions suggest that the North West and the Midlands will be the leading regions for growth in England over the next four years – seeing 28% and 24% price increases respectively.
In 2022 specifically, Savills have forecast growth of 4.5 and 4% in both of these regions, largely driven by the potential ceiling for growth and standard of amenities being created within key cities.
Going forward, growth in the UK – particularly in regional cores – will be dictated by interest rates. While rates are expected to increase in the years to come, the consensus is that there’s enough demand in the market to sustain the current levels of activity.
UK Gross Domestic Product (GDP) Forecast