Over the last two years we have witnessed an unprecedented property market. At the start of the pandemic no one could have predicted how the market would be affected by being forced to essentially close from March to June.
During the pandemic, if you weren’t a key worker you were confined to your home to work, home school your children and socialise. Everything was taken online, and gardens were the must-have feature of any home.
The announcement that there was a stamp duty (LBTT in Scotland) gave people an incentive to search for a property that better suited their new lifestyle, and low borrowing rates and the mortgage guarantee scheme gave people further opportunities to move. Many people were spending less money on travel and commuting whilst still working and so they had more savings to put towards a property.
Now, nearly two years on, the housing market has enjoyed its largest New Year figures in five years with demand for all types of properties at a record high. Demand from buyers went up by an impressive 49% in January 2022 with house prices rising at an annual rate of 7.4%, pushing the average price of a property up to £242,000.
There has been a lack of supply across the market over the last 18 months which has pushed up prices. According to Zoopla’s latest house price index, record demand was recorded for all property types with buyers searching for both houses and flats. Although more homes are coming to the market, there is still a significant imbalance in supply and demand.
In 2021, property prices went up by 7.4% with higher gains for houses compared to flats. The cost of detached, semi-detached and terraced houses increased by 8.8% over the year to £289,500. However, the price of flats went up by just 2.2% to £175,700.
Three-bedroom homes outside of London were the most sought-after property type – with demand four times higher than the average calculated over the last five years.
Supply and demand
The number of homes on the market is currently 44% below the five-year average, but at the end of 2021 this was 47% down. Demand continues to outstrip supply, but the good news is that there is growing correlation between the types of home buyers most want and those that are available.
We saw a rate increase today, but this is not expected to have a big impact on the property market, as, by historical standards, mortgage rates remain low and the majority of people will be protected from any base rate rises as three-quarters of homeowners are currently on a fixed rate deal.
The number of homes coming onto the market is good news for first-time buyers – at present flats offer better value as the price rise for this type of property has been modest compared to houses. For house owners wanting to move up the ladder, it’s great news as demand for two- and three-bedroom houses is high and with more properties being put up for sale, you’ll have more choice.
If you are looking to move this year – or want to check your mortgage deal is suitable for your circumstances, talk to us at The Mortgage Hub.