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UK house price boom ‘to end in 2022 amid cost of living squeeze’


Housing market

UK house price boom ‘to end in 2022 amid cost of living squeeze’

Mortgage lender Halifax forecasts growth will be broadly flat next year

Properties in Knightsbridge, London

The average UK house price is £272,992, almost £34,000 more than at the start of the pandemic – although properties such as these, in Knightsbridge, London, cost a lot more. Photograph: Chris Harris/Alamy

Mark Sweney 

Properties in Knightsbridge, London

A row of brightly coloured terraced homes in Brighton

The boom in UK house prices is likely to end next year as household finances become increasingly stretched, according to Halifax.

The mortgage lender said it expected the red-hot increases in average house prices over the last two years – 8% so far this year and 6% in 2020 – to end, with growth forecast to be “broadly flat” in 2022.

UK housing market forecast for 2022? Busy, but less frenetic

The Bank of England raised interest rates on Thursday for the first time since the start of the coronavirus pandemic, from 0.1% to 0.25%, and signalled further increases in the months ahead, potentially dampening appetite for spending as budgets come under strain.

The Bank made its move after the Office for National Statistics said that UK inflation jumped to a 10-year high of 5.1% in November, as the price of petrol reached a record high and the global chip shortage pushed up car prices.

“With the prospect that interest rates may rise further in 2022 to subdue rising inflation, and with government support measures phasing out, greater pressure on household budgets suggests house price growth will slow considerably,” said Russell Galley, the managing director of Halifax.

Halifax expects strong housing price levels to be maintained – the average UK house price is £272,992, almost £34,000 higher than at the start of the pandemic – but that growth in 2022 would be between flat and 2%.

“There is still a large degree of uncertainty around this forecast,” Galley said. “Particularly around the extent to which savings accrued during the pandemic continue to boost housing transactions and prices, and how lasting the recent shifts in housing preferences prove to be.”

With the pandemic-fuelled shift to flexible, remote and home working, homebuyers have rushed to buy larger properties in picturesque and rural locations outside urban centres.

Other factors increasing homebuying were the government’s stamp duty holiday, which came to an end in England and Northern Ireland in September after finishing earlier in Scotland and Wales, and historically low interest rates.

“We normally see a seasonal market slowdown towards the end of the year, but we are witnessing a comparably active market instead,” said Guy Gittins, the chief executive at the real estate agent chain Chestertons. “As a result of demand outstripping supply, the market has seen a 30% drop in sellers willing to lower their asking price. Looking ahead, we are still seeing plenty of unsatisfied buyer demand.”

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However, with soaring inflation and further rate rises expected in 2022, the cheap mortgage deals that have boosted the housing market in 2021 are likely to be more difficult to find.

“Nevertheless, interest rates will remain low by historic standards and property prices will continue to be supported by the limited supply of available properties,” Galley said. “However, it is prudent to highlight the potential for house prices to rise or fall by much greater margins next year, depending on how Covid-19 and its variants continue to impact the economic environment and the potential for any further policy interventions.”

Despite the potential cooling of two years of house price growth, there are fears first-time buyers will continue to be priced out of the UK market.

“The news that house prices [could] continue to rise is particularly concerning for first-time buyers, a group who have struggled with rising house prices for decades,” said Sophia Guy-White, a co-founder of Generation Home, which specialises in mortgages for first-time buyers. “And although this demand seems to be cooling, there remain too few homes to buy and too many buyers locked out of homeownership.”

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