Soaring house prices to flatten in 2022 after record growth – projections laid bare

House prices: Expert discusses 'interesting' pricing differences

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Prices grew 8.2 percent year-on-year in November 2021. The average UK house price now stands at £272,992 – an increase of £20,757 compared to 2020. But, according to Halifax’s market outlook for 2022 , this rapid growth is likely to come to an end in 2022. The bank instead forecasts growth dropping to around one percent. Russell Galley, managing director of Halifax, put this year’s strong growth partly down to the stamp duty holiday which saw many buyers racing to purchase with the discounted rate.

This “Intensified already heightened demand from increased homeworking and the desire for more space”, Mr Galley said.

Another factor has been rock bottom interest rates – which have enabled buyers to extend their budgets. The interest rates have seen people rushing to secure a fixed mortgage deal before any rate rise.

That rise finally came on Thursday with the Bank of England taking the first steps towards higher interest rates – by raising the base rate to 0.25 percent.

Mr Galley said: “Looking ahead, with the prospect that interest rates may rise further in 2022 to subdue rising inflation, and with Government support measures phased out, greater pressure on household budgets suggests house price growth will slow considerably.

“Nevertheless, interest rates will remain low by historic standards and property prices will continue to be supported by the limited supply of available properties.”

The surge in house prices this year has prompted concerns from many over affordability, particularly for first time buyers.

Recent public opinion figures from Lloyds Banking Group found two thirds of people didn’t believe the housing market was helping people access affordable and good quality homes.

The majority of homeowners and renters also agreed prices were the biggest issue facing the market – with affordability only likely to get worse over the next three years.

According to Mr Galley, inequality in the housing market remains a big issue with younger and lower-paid people struggling to access housing that meets their need.

He added: “This disparity has only intensified over the last two years.”

While many indicators point towards a cooling in the housing market next year, there remains a number of significant unknown variables.

Question marks remain over how long the shifts in housing preferences during the pandemic might prove to be. Some predict demand for city properties may pick up again, particularly driven by foreign buyers.

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The impact of Covid on both Government policy and the economy is also a major unknown hanging over most markets.

One clear factor is constraints on supply – with the construction industry reporting shortages of both materials and labour, which has in turn slowed down new projects and added to costs.

While supply chain shortages are expected to ease next year, addressing the shortage of skilled labour may take much longer.

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