The housing market in 2021 was as unpredictable as ever, but overall, it ended on a high note with sky-rocketing house prices. Experts have warned that 2022 won’t look like the last year, though, and are predicting a major slowdown in terms of price growth.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
It already started to cool down after the Stamp Duty Land Tax (SDLT) holiday ended towards the end of the year, but rising interest rates and mortgage costs, and a surge in cost of living could mean the market might be headed for a downturn.
As ever, the coronavirus looms over the market and as such, the surge in omicron cases might push the Bank of England to delay more base rate increases, but with inflation rates also rising steadily, they might not have a choice but to to raise them.
Previously, the pandemic inspired a shift in housing priorities for buyers, but since the coronavirus continues to mutate and spread, many people who wanted to sell their homes might change their minds and stay put. This will only exacerbate the supply issue and could contribute to a cooler market.
Slower pace in the new year
While the lack of properties available will certainly affect the market, we’re already seeing decreased demand from buyers.
House prices surged and activity flourished thanks to wealthy homebuyers’ desire to move to bigger properties, homes with outdoor space, or property close to their loved ones. However, the bulk of these moves have already taken place so the performance of the market this year will rely on homebuyers who are willing to undertake a significant mortgage. This means that interest rates are more important than ever, so all eyes will be on the Bank of England to see if/when they make further rate increases.
Government schemes ending contribute to slow down
If the BoE base rate surpasses 2%, house prices will fall accordingly. Of course, there are some factors that could cause house prices to either continue on their same trajectory, or at the very least prevent such sharp change. Increasing mortgage costs and stricter affordability tests might deter homebuyers that need to take out loans.
The end of government support schemes such as the Help To Buy scheme will also play a role, much like the end of the stamp duty holiday did, and we’re likely to see a rush of activity before that happens in 2023.
Supply and demand
In the unlikely event lockdown restrictions come in again, the housing market will surely be disrupted just as it was with other lockdowns. There are now systems in place to help with the flow of work so things won’t come to a standstill, but activity certainly won’t progress the same.
Certain property types are still more in demand than others – recently built flats, for instance, will continue to struggle to attract buyers, and some more affordable regions will draw more buyers as well.
With our years of knowledge and experience in securing mortgages for dental and medical professionals, the experts at Dental & Medical Financial Services will help you prepare for the mortgage and home buying process from start to finish. If you need help with the homebuying process, don’t hesitate to contact us when you’re ready to embark on your house hunt.
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