What will 2022 bring for the UK housing market?

The year ahead could bring more stability to the housing market, after a bumper year in 2021 saw frenzied homebuyer activity and prices surging to record highs.

A stamp duty holiday, which ended in 2021, helped fuel about 1.5 million house purchases across the UK over the year – the highest number since before the global financial crisis.

Huge flexible working changes also prompted many people to relocate.

According to trade association UK Finance, 2021 was the strongest year for mortgage lending since 2007.

It estimates £316 billion worth of home loans were given, driven by strong homebuyer activity. It marked the highest total since gross lending reached £357 billion in 2007.

Looking ahead, James Tatch, principal, data and research at UK Finance, told the PA news agency: “We’re seeing a return to a stable path for new lending, for (2022) onwards.”

He said a little bit more remortgaging activity is expected to take place in 2022 and this could accelerate further in 2023.

In two years time, a rump of five-year fixed-rate mortgage deals is set to end – and borrowers will be looking to refinance these loans.

“That will provide a boost to remortgage numbers,” Mr Tatch said.

The trend of people moving out of cities due to more flexible working conditions could persist, he added, saying: “It seems like it hasn’t run out of steam yet.”

With house prices reaching record levels in 2021, housing affordability for first-time buyers may continue to be stretched.

Higher outgoings generally from inflation, which hit 5.1% in November, could mean some people have less leftover income to spend on their mortgage.

Mr Tatch said: “We’re seeing a slightly more challenging environment for first-time buyers compared to pre-Covid because of these house price rises.”

According to property professionals’ body Propertymark, by November 2021 there were just 20 homes available on average per estate agency branch – the lowest figure in records going back 20 years.

Propertymark said the demand/supply imbalance has helped to drive up house prices, with 38% of homes sold for over the asking price in November.

Nathan Emerson, Propertymark chief executive, said: “Agents are not seeing any signs that demand will slow in 2022.

“The question then remains – how does the market encourage new stock? Many sellers wait to see something they like and will market on account of having found.”

Mark Manning, managing director of Northern Estate Agencies Group, which covers Leeds and Manchester as well as locations in Lancashire and Derbyshire, said: “A growing population in our thriving region is resulting in a significant increase in the number of buyers, and there’s simply not enough properties to satisfy demand.”

Rightmove’s director of property data, Tim Bannister, said: “It’s been a frenzied property market over the last 18 months, with changed housing needs driven by the pandemic inspiring many moves and lifestyle changes.”

He continued: “However, while the pandemic is still having an ever-changing impact on society, we expect a housing market moving closer to normal during the course of 2022.

“A closer-to-normal market means a slowing in the pace of price rises, and a better balance of supply and demand for homes.

“We’ve seen a jump in the number of owners requesting valuations from agents with a view to marketing their homes, which suggests some fresh property choice could be coming to market.

“This will suit movers who may have held back from entering the hectic market during the last 18 months.”

Richard Donnell, director of research at Zoopla, expects house sales to edge down to levels more in line with the long-term average.

He said: “As the UK emerges from the impact of the pandemic, housing transactions are expected to decline by 20% from their high of 1.5 million in 2021, to 1.2 million in 2022, in line with the long run average, but still relatively high compared to the last decade.

“House price growth is expected to be 3% by the end of 2022, with the highest growth projected for the East Midlands and north-west England, while growth in London is projected to remain low at 2%.”

Mr Donnell said that while there has been some general improvement to housing affordability in London in recent years, the issue of affordability “will continue to limit potential price rises in the highest value areas of London and southern England in 2022 and beyond”.

Mortgage rates edging up could also dampen demand, he said. The Bank of England base rate recently edged up from 0.10% to 0.25%.

Lucian Cook, Savills head of residential research, said: “2021 has been a remarkable year for the housing market, underpinned by a strong economic recovery, widespread reassessment of housing needs, ultra-low interest rate environment and, for the most part of the year, a stamp duty incentive.

“It will be difficult to replicate these market conditions throughout 2022.”

He said the continued demand/supply imbalance indicates a “tempering of house price growth rather than price falls”.

Mr Cook added: “We have pencilled in annual price growth of 3.5% across the country as a whole for 2022 but this is on the basis that the so-called ‘race for space’ will ease.”