The average price of property in the UK hit a record high eight different times in 2021 itself. Then, in January 2022, the average price of property in the UK hit a record high, yet again. From November 2020 till November 2021, the average price of property grew by a whopping 10 per cent in the UK. Currently, the UK property market is in overdrive. With an imbalance between demand and supply, the low interest rates and the rising rate of inflation, property prices in the UK are on the rise. This brings us to the question on everyone’s mind, will property prices continue to rise in 2022?
The average price of property in the UK hit a record high in March 2022, with prices averaging £278,123 as per the latest house price index. As of now, house prices have gone up by 10.8 percent from February 2021 to February 2022, and experts believe that the prices will continue to rise. By using this data, we can safely conclude that this is the highest annual growth rate of property prices in the UK in the past 15 years. If you’ve been thinking about selling a property, you might want to wait, because experts predict that the property prices might continue to rise in 2022. Keeping with the trend of the last 8 months, where property prices have hit a record high every month, it is not impossible to see a further rise in property prices in the UK.
How much has the average price of property risen in the UK in the past year?
In Wales, the annual price of property has risen by a massive 13.8 per cent, thus putting Wales at the top of the list of the best performing areas in the UK. In Northern Ireland, property prices have risen by 13.1 per cent whereas, in South West England, the average price of property has risen by 13.6 per cent. Surprisingly, London was actually the weakest performing area in the UK with property prices rising by a mere 5.4 per cent. This minimal growth is directly related to the change in buyer preference, as more and more people started moving out of the city and into the suburbs in order to upgrade their homes, and their lifestyles. However, the price of property still remained the highest in London, with prices reaching as high as £521,146. On the other hand, the prices of property in North East England have remained on the lower side, with the average price of property actually falling by £147,214.
But, why are property prices increasing so significantly?
For one, the Covid-19 pandemic certainly played its role in impacting property prices. Initially, during the first lockdown due to the Covid-19 pandemic, there was a complete ban on real estate activities. When the estate market opened, there will a definitive slump. In order to boost the real estate market, and the UK economy, the UK government announced the stamp duty holiday which was a temporary suspension of the stamp duty tax. While the stamp duty holiday has come to halt in October 2021, there are still quite a large number of buyers that made use of this tax break. It was expected that property prices will drop after the end of the stamp duty holiday. However, the average price of property in the UK hit a record high in December 2021, January 2022 and once again in March 2022.
What factors will impact the average price of property in the UK in 2022?
The rate of inflation will certainly impact the price of property in the UK. The rate of inflation is on the rise, with a 5.5 per cent increase in January 2022. The Bank of England has predicted that the rate of inflation can rise above 7 or 8 per cent in 2022! In order to combat the rising inflation, the Bank of England has increased the rate of interest. This means that banks and lenders will further increase the rate of interest on loans and mortgages, thus making the total value higher. Also, due to the war between Ukraine and Russia, there has been a massive spike in the prices of fuel, gas and energy, all of which directly impact the cost of living. As the prices of gas and energy continue to rise due to the war, the cost of living will continue to rise, thus adding to the rate of inflation. In essence, this cycle of rising prices and increasing inflation is what will lead to a further increase in the average price of property in the UK.
What do the experts have to say?
Some experts believe that it is difficult for property prices to continue to grow despite the difficult economic conditions. They believe that the increasing inflation, the rising rate of interest and the increasing cost of gas, energy and fuel will increase the cost of living, thus putting pressure on common households. In such an economic climate, we will see a significant drop in the demand for property. On the other hand, some experts believe that the race for space in the UK will still continue, thus impacting the property prices in the UK. Lloyds Banking Group believes that the average price of property in the UK will only grow by 1 per cent in 2022.
Experts at Cluttons suggest that the property prices in London might actually fall by a whopping 10 per cent whereas the experts at Foxtons predict a 1 to 3 per cent growth in the property prices in London. Data from the Hamptons assumes that the average price of a property in the UK will increase by 3.5 per cent to 5 per cent from 2022 to 2024. So, while most experts agree that this year will be relatively slower, there is a sort of common consensus that property prices will continue to rise in the UK in 2022. In essence, the market is expected to grow, but the rising inflation coupled with the high-interest rate and high utility bills will slow down the UK property market by 2023.