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After a strong 2021, the UK housing market faces an uncertain 2022, says Jan Crosby, head of infrastructure, building and construction at KPMG UK:
The stamp duty holiday that partially fuelled last year’s increased demand is long gone, but concerns around house price inflation, ongoing supply chain issues and the impact of the Omicron variant are creating an unwelcome climate of uncertainty.
“Hopefully these pressures on the market ease sooner rather than later, although the price rises seen last year will continue to impede first-time buyers in particular.
The end of the stamp duty holiday has been followed by signs of the housing market returning to more normal levels of activity. And the fundamentals facing the market are looking less supportive of continued growth in prices. Higher inflation and tax rises will affect households’ spending power and mortgage rates are likely to rise in response to the Bank of England’s decision to increase the policy rate. Moreover, pandemic-driven changes in housing preferences, and the resulting boost to demand, are likely to fade over time.
But mortgage rates will be increasing from a very low level. Unemployment is low and households, overall, are still sitting on substantial unplanned savings accumulated during the pandemic. So, while the EY ITEM Club expects house price growth to decelerate significantly this year, an outright fall in prices is unlikely.
‘Buyers are clearly still emerging following their short hibernation to carry on where they left off, quickly snapping up new properties which come onto the market. Most are choosing to forget worries about rising inflation, interest rates and taxes to say nothing of Omicron.
‘However, lack of stock is reducing the number of transactions and supporting prices. Market appraisals and new instructions are improving but not quick enough yet.
