Over the previous few months, the typical UK property price started to fall based on the major house price indices. Same with this the beginning of a far more serious decline, or perhaps a temporary blip?
The last year would be a tumultuous one for the UK economy, with the pound tumbling, the base rate rising and Brexit looming on the horizon.
With that very same uncertainty following us into 2022, it’s no wonder homeowners are anxiously watching their property values, while buyers are searching for the best moment to strike.
Which? explains what’s became of house prices in recent times, what you can expect in 2022 and just how it'll affect property owners and aspiring buyers.
What could last year’s house price trends mean for 2022?
There’s no crystal ball that may predict how house prices will move, however it will help consider whether recent trends are likely to continue.
Which? looked at four major house price indices in the united kingdom market: the ONS index, which is according to sold prices; the Rightmove index, based on prices; and also the Nationwide and Halifax indices, which are both based on mortgage lending (you can find out more below).
While the indices show different average house prices throughout 2022, all show a dip towards the end of the year, indicating that average house prices are falling. The average price in August, based on the ONS, was lb232,917 – by October, it was lb231,915.
That said, month-on-month fluctuations are to be expected, as property tends to be more sought after at some times of the year than the others.
Another way to look at the data is by examining the year-on-year change. This implies that prices are still greater last year by most measures – except for the Rightmove index – but that growth has slowed within the year.
Which house price index is the most accurate?
It’s clear that house price indices don’t always align, but that’s not to say that them are wrong. Each draws upon another data set, meaning you’re visiting a snapshot of the market at different times.
The ONS bases its data on all sales recorded in the Land Registry, which makes it the most comprehensive source. But there’s a two-month delay in this data being published, not to mention a substantial lag between a house being sold and the registry being updated. Which means this index may not supply the most current information.
Both the Nationwide and Halifax indices are based on the lenders’ residential mortgage data. The information is published at a one-month delay – so, for instance, info on mortgages approved in November is released in December.
The Rightmove house price index, meanwhile, is based on asking prices by owners on the property portal. Since many owners will ask for that highest possible price, the index is inflated and does not usually reflect what houses are actually selling for. However, the information is accurate for the month it’s published, meaning you can use it to take the temperature of what owners and agents currently expect.
House price predictions 2022
Looking in the trends over the past couple of months, numerous experts believe house prices may grow more slowly within the coming year.
Property surveyors’ association Rics warns that house prices are unlikely to move at all in 2022, while property consultancy JLL puts growth just 0.5% for the coming year.
Estate agents and banks are a a bit more optimistic, with Savills predicting modest development of 1.5% and Halifax estimating prices could rise between 2% and 4%.
However, there are a variety of hard-to-predict factors that could influence price growth over the coming year.
The UK is set to leave the European Union in March 2022, however the consequences of this for that economy, trade and employment continue to be unclear.
If Brexit creates a drop in business activities or loss of jobs, it’s possible that house prices may suffer too. However, a stronger economic outlook could put more money in people’s pockets and give house prices a boost.
This means Brexit negotiations are one of the important aspects to look at within the coming year.
Base rate rises
The Bank of England base rate influences just how much lenders charge consumers for borrowing. A higher base rate may push-up mortgage rates, making it harder for people to afford repayments and slowing price growth.
The base rate fell dramatically after the economic crisis of 2008, however in the past 14 months it’s been on the rise – first to 0.5% in November 2022, then up to 0.75% in August 2022.
At its newest meeting, the Monetary Policy Committee suggested more hikes could be necessary, albeit at a ‘gradual and limited extent’.
Economic factors tend to influence demand for property: when individuals be more effective off, they can buy more homes and pay more for them. But it’s also worth considering the supply of properties, which is relatively tight in lots of regions of the united kingdom.
Halifax predicts that growth will remain comparatively strong over the coming year, despite challenging conditions, due to the ‘shortage of homes for sale and lower levels of housebuilding’.
If fewer homes are available, sellers can require more for that homes that are available on the market.
Government regulation can have a significant effect on property prices, especially through schemes that incentivise individuals to buy.
The Assistance to Buy equity loan, for example, enables buyers to borrow a particular number of the cost of a new-build home in the government. Across Britain, it’s 20% (except in London, where it’s 40%); in Scotland, it’s 15%.
Critics have argued this has led to the artificial inflation of new-build property prices, which some have dubbed the ‘Help to Buy premium’.
The Scottish government has additionally announced a rise to the LBTT (Scottish stamp duty) surcharge for buy-to-let investors, due to take effect on 25 January 2022. The change can lead to a spike in sales within the next couple weeks as investors rush to accomplish before the increase is implemented, before dampening interest in buy-to-let properties.
What in the event you do?
While keeping track of broad market trends is essential, they won’t necessarily tell you how much your own home (or dream property) is worth.
To value a particular property, you’ll may need to look at sales nearby and just how the home compares based on its size, condition and placement. If you’re concerned your home’s value may have dropped, you could ask local auctions to provide you with a valuation and research what similar homes in the region have sold for. To find out more, you can read our guide: how much is your house worth?
If you’re looking to remortgage, keep in mind that lenders and surveyors are usually more conservative in their valuations than estate agents, so you might discover that you can’t remortgage in the loan-to-value ratio you might expect. Within the worst of all, you may not be able to remortgage whatsoever, and end up paying the lender’s standard variable rate. Find out more within our guide to remortgaging.
Similarly, when you’re buying inside a market that’s volatile, beware of offering a lot more than the bank would like to lend. Down valuations – whenever a lender values a house for under the customer has offered – tend to be more common in markets where prices are falling, but owners’ expectations remain high. Should this happen to you, you’ll need to see whether the seller is willing to accept a lower price than you originally agreed.
Then again, buying in a slow market could be an chance to bag a good deal that you might not have access to been able to pay for previously.
Speak to some mortgage broker
In uncertain economic times, finding the right mortgage deal is critical – both when buying so when remortgaging. It can help to speak to a mortgage broker, who are able to assist you in finding an offer that suits your needs.