Property prices are set to rise by 5% next year according to Rightmove due to strong demand and a historically low levels of stock.
This should include a 3% increase in London – though some think this prediction is too modest – as the property market in the capital is set to finally recover from stalling during the pandemic.
The question is whether price growth is derailed by the new Omicron variant, which is threatening consumer confidence.
Tim Bannister, director of property data at Rightmove, said: “It’s been a hectic 18 months for the property market since the end of the first lockdown, with changed housing needs driven by the pandemic inspiring many moves, and the stamp duty holiday encouraging some movers to bring their plans forward.
“The net result as we approach the start of the 2022 market is the lowest ever available stock of property for sale per estate agency branch, yet with ongoing high buyer demand.
“This imbalance between supply and demand has resulted in buyer demand per available property being at near record highs, suggesting that the 2021 scenario of multiple buyer bids on a high proportion of properties when they come to market is set to continue in the new year.
“We do, however, expect the pace of rises in 2022 to be slower than in 2021 due to increasingly stretched buyer affordability following this year’s rapid rises in average prices. Slowing in the pace of price rises and activity is likely to be more evident in the second half of the year as base rate rises, higher inflation, and higher taxes begin to weigh more heavily on buyer sentiment.
“Therefore if sellers are too optimistic on their asking price in the first half of the year, they risk missing the most active part of the market. While local markets vary considerably in their supply demand imbalance, Rightmove’s unique access to this detail and scale of data underpins our forecast for overall continued upwards price pressure in 2022 despite the prospect of base rate rises.”
The most competitive markets are in Scotland, the West Midlands, the South West and Yorkshire and the Humber, which are likely to see price growth at a higher rate of upwards of 7% next year.
Rightmove said it based its predictions on supply, demand and pricing data points across the property market, along with insights from a panel of experts.
Marc von Grundherr, director of Benham and Reeves, said: “While there’s no crystal ball that can truly predict the fortune of the property market, it’s likely that next year will see further growth even with the potential threat of a marginal uplift in interest rates.
“Any increase is likely to be manageable for the average homebuyer and it simply won’t deter demand which will continue to inflate prices as buyers battle it out for limited stock.
“Those on the ground in the London market will tell you that the prediction of a three per cent increase is quite some way off expectations. London has been building a serious head of steam in recent months, buoyed by a return to the workplace, as well as an uplift in foreign buyer demand as travel restrictions have eased.
“Yes, the latest threat of the Omicron variant may now play a part, but it simply won’t derail a London market that has finally awoken from a slumber of subdued property price growth. We expect the central London market to climb by four to five per cent at the absolute least, while outer London will see further growth still.”
Buyer demand is currently up by 2% on the frenetic period this time last year, and up by 40% when compared with November 2019.
These ‘late-bird’ movers will form a significant proportion of activity in the year ahead, and an overall less frenetic pace of the market in 2022 compared to the last 18 months and a predicted return to more ‘normal’ conditions will suit some owners who have been deterred by the hitherto hectic pace of the property market.
This should see more properties come to market, especially when combined with the usual surge of speculative spring sellers who look to get on with their moving plans early in the year.
The firm said there are already encouraging signs, with a 19% jump in November in the number of people requesting for agents to value their home via Rightmove compared with the same period last year.
Greater supply of properties coming to market should lead to a reduction in the proportion of multiple offers on properties due to greater buyer choice, and a lessening in the pace of upwards price pressure.
Bannister added: “While Rightmove sees a continuing busy market in 2022, we forecast it to be less frenzied than 2021 especially if the current scarcity of properties is eased as more owners decide to come to market in the first half of the year.
“Movers will still benefit from good mortgage availability and attractive rates even if base rates rise, and more choice of property coming to market and the slower pace of price rises compared to 2021 will encourage some who have held back so far to take action.
“While London overall will continue to be a price drag on the national average, there will be hotspots and cooler spots as its own unique and diverse markets continue to operate at different speeds. International buyers have been more on the scene, and both at this top end and lower down the price brackets, buyers are finding some attractively priced properties as the combination of London’s post-boom rebalancing and Covid effect changes on supply and demand in its many sub-markets plays out.”