The Pandemic Isn’t Over, But What About the Property Boom?

While the prospect of leaving the EU and the 2008 financial crisis put downward pressure on property prices, the global pandemic has had much less of an immediate impact on the market as a whole.

Fuelled by pent-up demand, a generous tax incentive and a healthier work/life balance, the actual market outperformed almost every UK property price forecast during the height of the pandemic. With the average property price topping £250,000 in 2021, the majority of us braced ourselves for a sudden drop in prices, especially as government incentives drew to a close – will 2022 be the year?

Will Property Prices Fall in the UK in 2022?

2021 was a year like no other, particularly  for the UK property market. While the UK was recovering from yet another recession, the Stamp Duty holiday and a continued demand for property saw the market thrive. 

As property transactions took longer to complete than ever before and more homeowners climbed the ladder, property prices rose by almost 10% in 2021 – the fastest rate of growth in a single year in more than two decades. With the addition of a favourable lending environment and a significant undersupply of property, this momentum sustained property price growth for the entirety of Q4, even with the end of the Stamp Duty holiday, helping a number of locations lay claim to be the best place to invest in the UK in 2022. 

Regardless of whether you’re a property enthusiast or seasoned investor, you’ll know that UK property is a ‘seasonal market’. Typically, December is a quiet month in the world of property, with Christmas festivities ranking considerably higher as a priority than purchasing a property. 

2021, once again, decided not to follow the rules. The average UK property price hit £276,091 in December, a new record for the market, and falling prices in 2022 seems like a much less likely occurrence. 

Not only has the UK market avoided a cliff edge with property prices, but more increases are on the horizon. According to the latest report by JLL, UK property prices could rise by almost 5% this year, which would leave the average property price standing at around £290,000. 

Similar to what we have already seen over the past two years, UK property price forecasts have highlighted the areas that will see more growth than others, and as city centres continue to rebound, the likes of Birmingham and Manchester are forecasting the biggest increases. 

With Birmingham forecasting up to 24.5% price increases in the next four years, closely followed by Derby at 17.5%, more and more investors are continuing to look to the Midlands, especially with the reassurance of a positive market. 

What is Sustaining Property Prices?

Although the UK is currently free from most Covid-19 restrictions, the pandemic is still sustaining property prices in one way or another. The increase in property prices in more recent years has seen the majority of homeowners build equity in their homes, meaning more competitive mortgages are slowly becoming more available. 

In a bid to upgrade their homes and access more affordable mortgages, the activity from middle-aged homeowners will keep the UK property price forecast buoyant for the next 12 months, at least. That said, younger buyers could also contribute to a strong property market, with the wider availability of 95% mortgages and government efforts enticing more first-time buyers. 

While a key trend throughout the UK lockdowns was the ‘race for space’, the return to the office will continue to drive younger workers back to city centres. As more professionals  continue to search for a greater sense of normality, cities will continue to bounce back and sustain property price growth in key areas across the UK. 

What About the Rental Market?

Despite an influx of buyers in the property market, the rental sector also experienced a bumper year in 2021. The increase in property prices saw the property ladder become less accessible for a lot of first-time buyers, even with the introduction of 95% mortgages and the Stamp Duty holiday. As a result, purchasing a property became more expensive than renting by over £100 a month.

The rise of ‘Generation Rent’, combined with the rebound of UK city centres, will continue to sustain key rental markets in 2022 and beyond. While the rental market as a whole could see up to the 12% growth in prices by 2026 – 2.5% of which will be in 2022 – the increases across key cities, such as Birmingham, Derby and Manchester reinforces the positivity of UK property forecasts overall. 

With the 2022 Commonwealth Games under its belt, it’s no surprise that Birmingham is quickly becoming one of the best places to invest in the UK for 2022. Forecasting a 3.5% increase in average rents over the next 12 months and 14% rental growth by 2026, the performance of the second city indicates that for the Midlands, the property boom is only just beginning. 

Northern cities, including Manchester and Leeds are forecasting similar rental growth over the next four years, with rents increasing between 13%-15% by 2026. The future of the rental sector only signifies the strength of the UK property market as a whole, bringing even more investment hotspots into the spotlight.

While the UK is free from most Covid-19 restrictions, the pandemic is far from over. The UK property price forecast initially approached 2022 with caution, but with the momentum from the past two years continuing, the UK’s property boom is expected to continue for the next four years – regardless of the pandemic.