Yahoo Finance How house prices have risen across UK in 2021
UK house prices soared in 2021. The market saw a 7.1% annual rise in house prices, with prices rising by an average of £16,000 ($21,228), Zoopla’s latest price index revealed.
The total value of the UK housing market was up £670bn in 2021, taking it to a total of £9.5tn.
The average home now has a market value of £240,800 compared to £224,800 a year ago.
Some 5 million homes — approximately a fifth of the UK’s private housing stock — saw their value increase by more than £35,000 this year.
"This year has been a record year for the market, with the stamp duty holiday and the pandemic-led ‘search for space’ among homeowners resulting in the highest number of sales since before the financial crisis, with 1.5 million transactions,” said Grainne Gilmore, head of research, Zoopla.
House prices in nearly every region of the UK have risen this year by more than in 2019 and 2020 combined.
Buyer demand shaped the property market this year, running an average of 15.7% higher than 2020 levels. Buyer activity culminated in June 2021, when more people moved into a new home than in any month since 2005.
By contrast, the stock of homes was depressed all year and is currently down by 33.2% — creating intense competition amongst buyers and accelerating house price growth.
“Such a busy market eroded the number of homes available to buy, as properties were being snapped up so quickly,” said Gilmore.
“This imbalance between demand and supply has put upwards pressure on prices."
The levels of buyer demand, sales activity and new homes being listed for sale have slowed in recent weeks as they do each year around the holiday season.
The market is now preparing for a seasonal bounce back, expected to start just after Christmas in line with historic annual trends.
This seasonal pick-up in demand is also expected to be fuelled by a continued reassessment among homeowners who have been prompted by the pandemic to reconsider where and in what type of home they are living, Zoopla said.
The impetus for moving continues to be a demand for more space and the change in working patterns for those who work in offices.
What to expect in 2022
House price rises have increased household equity across the UK. These gains, coupled with homeowners looking for additional space, will underpin new supply pipelines and demand levels in the first quarter 2022, the Zoopla report said.
Guy Gittins, CEO of estate agent Chestertons, believes there are a number of factors that should continue to push property prices up in 2022.
“The economy is recovering better than expected, employment and wages are booming and first-time buyers will continue to benefit from the government’s help-to-buy scheme until April 2023,” he said.
Another crucial factor is that the number of people looking to move heavily outweighs the number of properties available on the market.
However, Gittins said price increases are likely to be tempered by the rising cost of living and the expected increases in taxes and interest rates.
Assuming the government does not introduce any more national lockdowns, Gittins predicts that average UK house prices will grow by 4% in 2022, before settling at 2% to 3% per annum over the following four years.
Marc von Grundherr, director of estate agent Benham and Reeves, is a little more bullish and expects house prices to grow by 5% next year.
He said he expects the market to remain robust, and he doesn’t think the threat of an interest rates increase will “topple the positive price trends seen in 2021”.
He is even more optimistic about London properties.
“We’ve already seen the capital start to awake from its pandemic property market slumber with a return to the office and the growing demand from foreign buyers all helping to cultivate early signs of house price prosperity.”
He believes London’s most prestigious neighbourhoods could see 7% to 9% house price growth.
“There’s no doubt that the current threat of Omicron may stifle domestic demand throughout the first quarter but London’s top line property market health lies with the demand from foreign buyers pushing the market across its very top tiers,” he said.
Gittins echoed this sentiment, stating: “Prime Central London prices will see growth of 7% next year as international buyers return in greater numbers, tempered somewhat by the additional 2% stamp duty surcharge that non-UK residents are now charged.”
Read more: UK's strongest sellers market for 2021
As for rent in the capital, Richard Davies, head of lettings at Chestertons, said that tenants are continuing to return to London in greater numbers — having left during the lockdown — and there is continued shortage of rental properties.
For this reason, he expects rents will continue to rise in 2022, albeit at a slower pace.
He forecasts that rents across higher value London locations will grow by 8% in 2022, and "rents in prime Central London by 10%. Rental growth across Greater London will be lower at around 5%”.
He said this is good news for landlords who are starting to see yields creep up above 4% in some areas, a fact that may encourage a return of buy-to-let investment, which has been largely absent since the introduction of the 3% stamp duty surcharge for second homes in 2016.
Read more: UK house prices see third month of double-figure growth
Meanwhile Robert Gardner, Nationwide’s chief economist, was not too upbeat about 2022.
“It appears likely that the housing market will slow next year, since the stamp duty holiday encouraged many to bring forward their house purchase in order to avoid additional tax,” he said.
He said the new Omicron COVID variant could reinforce the slowdown, if it leads to a weaker labour market.
But he said “the outlook remains extremely uncertain” and “the strength of the market surprised us all in 2021 and could do so again next year”.
“The market still has significant momentum and shifts in housing preferences as a result of the pandemic could continue to support activity and price growth."
