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UK housing market predictions 2022

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A palm holding a compass showing north. Predicting, forecasting house prices. Adjoin rent-to-own

The UK housing market is in a state of flux. In recent years, we’ve seen it being affected by a number of local and globall issues—from Brexit to Covid-19.

Today, the ongoing war in Ukraine is also having an impact. Severe sanctions on Russia are causing a sharp rise in the price of everything from petrol to food. How does this affect the housing market? It pushes up the cost of living, making it more expensive to heat your home and put food on the table. If you’re spending more on everyday items but your wages are staying the same, your affordability naturally becomes affected.

In the 12 months to February, prices rose by 6.2% on average. One economist even predicted that there will be a 10% increase in prices in Western countries if the costs of energy and food continue to rise. If the Bank of England were to increase interest rates, it would mean that around 2.2 million homeowners with mortgages linked to the Bank of England’s base rate would see an increase in the costs of their repayments. 

Although interest rates rose slightly at the end of 2021, they’re still at a historic low, meaning it’s still cheap to borrow money. People are therefore still buying houses. And the prices of homes continue to rise. At the end of March 2022, annual housing price growth was up 14.3% (compared to 12.6% in February), with prices up by 21% on pre-pandemic levels. 

These are interesting times. But how do housing market predictions 2022 look? Will people continue to buy houses if there’s a cost of living crisis? 

Here, we share housing market predictions 2022 verdicts from industry experts, and explain why Adjoin Homes offers the perfect stepping stone if you’re struggling to keep up with soaring house prices.

House prices

House prices in the UK are currently at a record high. According to Nationwide building society’s latest House Price Index, the price of a typical home is £265,312. Astoundingly, this is an average price increase of £33,000 in the last year alone.

Why have we seen such rises during a pandemic? It’s most likely to do with people’s spending habits changing. With more people staying local and working from home, many people have reevaluated their spending and realised how important it is to have a home they feel happy with. Those without gardens might not have been bothered by this fact before the pandemic. But in a world where booking a holiday abroad is still deemed risky, outdoor space has become more of a necessity. And if people are spending less on luxury holidays abroad, they have more money to spend on buying properties and moving house.

In addition, the pandemic also saw a stamp duty holiday in the UK from July 2020 to June 2021. Many people rushed to take advantage of this, creating a more volatile housing market in the process. 

Will house prices continue to rise? Many experts are predicting that house price growth will slow down in 2022. Savills forecasts a house price growth of 3.5% in 2022 and 3% in 2023. Meanwhile, Halifax are predicting prices to change by 0-2%

While these predictions still represent an increase, it’s small fry compared to the recent house price growth increases of 10% year-on-year. 

Mortgage rates

The number of people being approved for mortgages remains consistently high. In February 2022, the figure was roughly 71,000—almost 10% more than pre-pandemic levels. 

In recent years, we’ve seen prolonged low mortgage rates but they’re slowly starting to rise. In between January 2021 and December 2021, rates climbed steadily from 2.67% to 3.12%

Mortgage experts are predicting a further increase in mortgage rates. Selma Hepp, deputy chief economist at CoreLogic, estimates that mortgage rates will rise to 3.4% by the end of 2022. Meanwhile, Michael Fratantoni, chief economist for the Mortgage Bankers Association (MBA), predicts rates to be as high as 4% by the end of the year.

With mortgage and interest rates rising, as well as the general costs of living, we may well start to see less activity in the housing market in 2022. The recent Spring statement also offered little protection against households experiencing the effects of inflation. As a result, middle-income earners (typically next-time buyers) could come under the greatest strain. If people have less spare money in their pockets, their affordability will be affected, thus reducing their mortgage eligibility

Competition

If more people are being priced out of the housing market as a result of increased prices and higher rates, then we should expect to see less competition in the housing market as the year goes on.

This will be positive news to those looking to buy their first property. After all, in February, it was estimated that for every available property in the UK, there were an average of 26 prospective buyers according to estate agency trade body, Propertymark. That’s a lot of competition! If there are fewer buyers to compete against, you can expect a lower chance of bidding wars driving up average house prices and making it more difficult to enter the market.

So if you are thinking of buying a house this year, the prospect could in theory become easier. However, you will still see an increase in house prices (although the rate is expected to slow, it doesn’t show signs of falling… yet) so it might be worth hanging on to see what happens to house prices as the year goes on. That said, by the time house prices begin to fall, we may see further increases in interest rates and mortgage rates. It’s a guessing game.

How Adjoin Homes can help

If rising house prices, interest rates and inflation are causing you a headache, then Adjoin Homes can help. 

Rising house prices can make it tricky to buy a house and get a mortgage in certain areas—even to those on relatively high salaries. But our rent-to-own schemes make the prospect of buying a house easier, more affordable and less risky. 

We provide flexible packages with payment plans to suit your circumstances. You can choose to purchase the property or walk away if you change your mind at any point during the agreement and for up to 12 years. There’s no need to be priced out of the area you love. With Adjoin Homes, you can move into your dream home now. 

In Summary

These are unprecedented times. As well as the effects of Brexit and Covid-19, we’re also experiencing a cost of living crisis driven by various factors including those linked to Russia’s invasion of Ukraine.

As a result, house prices are increasing, interest rates are changing and disposable income is decreasing but things are expected to slow down.

Adjoin Homes’ rent-to-own schemes makes it easier to enter the property market. So if you’re worried about market uncertainty or you’re being priced out of certain areas as a result of soaring house prices, there’s a solution at hand.

Getting into your dream home is now a possibility.