The UK housing prices grew by a large and unexpected rate in 2021 and while many of the conditions that put the growth into play are still in place, the same rate of growth is not expected for 2022. The pace at which the average house price grew in 2001 was the fastest since 2007 and the largest annual increase since 2003. Halifax reported in their latest data the average house price hit £276,091 at the close of the year in December. The growth almost reached double digits but edged out at 9.8% last year. 

Russell Galley, managing director of Halifax, remarked, “In 2021, we saw the average house price reach new record highs on eight occasions despite the UK being subject to lockdown for much of the first six months of the year.”

The pandemic was expected to stifle home buyers, but instead it motivated them to enter the market. Lockdowns provided inspiration to seek a pandemic lifestyle dream home with more room in which to work privately at home, a place for learning and studying for children, and more room to get fit, and especially high on the priority list for many was outdoor space for children and pets to play.

Other motivating factors beyond the desire for more space included the opportunity to save money through the stamp duty holiday as well as historically low interest rates. The Bank of England had set the standard base interest rate at a 300 plus year low. With borrowing so cheap, home buyers took notice. 

The pandemic is still impacting the country, but lockdowns don’t appear to be on the horizon. The historic low interest rate of 0.1% was increased by the Bank of England’s Monetary Policy Committee (MPC) to 0.25%. The stamp duty holiday expired in September of last year. 

Some things have remained the same basically, such as extremely attractive low interest rates, while others have changed such as the loss of the stamp duty holiday. Therefore, 2021 is expected to hold up in the record books, and 2022 is not expected to outperform it.

Growth should occur, but it will be less energized. Home buyers are still present, but with the average house price at a record high many first time buyers will be shut out. This is especially so due to a lack of supply in the market.

There could be yet another surprise in the market in the first quarter of the year. Due to the MPC increasing the interest rate in December due to rising inflation, home buyers could be worried another increase might be on the horizon. To avoid missing out on the current low interest rates being offered by lenders, hopeful home buyers could make their move soon.

Also, home sellers that have been hesitant to put their property on the market could expect a lack of demand coming and put theirs on the market now to get a fast buyer. This could help keep first time buyers in the market and home movers interested as well.

Experts believe that perhaps the first part of the year could be an extension of the last, and a slowdown will occur later in the year. Growth is still expected, but then again there are a lot of unknowns and the housing market has been resilient over and again. The 2022 housing market will certainly be watched closely by home buyers, investors, home sellers, lenders, and experts alike.