Evidence builds that 2022 will be a robust year for the UK housing market
Early data from January and a positive economic outlook point to strong transaction numbers and price growth.
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Last week we suggested transaction numbers in the UK property market would be robust in 2022.
Market valuation appraisals and new prospective buyers have been rising as Omicron recedes.
Seven days later, the numbers are painting an even more positive picture.
The number of new UK prospective buyers registering in the week beginning 10 January was the second highest figure in the last decade.
Meanwhile, the number of market valuation appraisals (a leading indicator of new supply) in the week starting 17 January was the sixth highest figure recorded over the last ten years.
The positive performance of the housing market took most people by surprise over the last two years. It feels increasingly likely this will be repeated in 2022, even in the absence of a stamp duty holiday.
This doesn’t mean the high transaction numbers of the stamp duty holiday will be matched. Nor does it mean UK price growth still be in double digits by December. Instead, the market will be more stable and liquid.
What, though, are the risks?
As speculation surrounds how long the Prime Minister will remain in office, “Partygate” has become a louder topic of conversation in recent weeks.
Buyers and sellers typically pull back ahead of general elections but the same won’t be true if the Conservative Party membership has to vote on its next leader. Even before we get to that stage, Tory MPs need to feel comfortable they have found an election-winning replacement for Boris Johnson, which is not guaranteed to happen.
Compared to the knife-edge Parliamentary mathematics of the Theresa May government post-2017, things feel comparatively stable.
Rising mortgage rates is another risk on the horizon. However, Savvas Savouri, the chief economist at Toscafund, believes the lending landscape will begin to shift noticeably in 2022, to the benefit of borrowers.
“In much the same way as Aldi and Lidl disrupted the supermarket sector, challenger banks will increasingly move from buy-to-let lending into the main mortgage market this year,” he said. The result will be downwards pressure on rates and a dislocation of the link between the base rate and mortgage rates, he believes.
It doesn’t mean rates will fall or remain flat, but there will be more to consider than upwards pressure from a rising base rate.
Savouri is also upbeat about the prospects for the UK economy and jobs market. “The exit velocity from this crisis will be greater than the entry velocity for a number of reasons,” he said.
The first is that the industries that are hiring are looking for similar skill-sets to those who have laid off workers. “There hasn’t been a regional-specific chasm created by this recession as there has been in the past when shipbuilding yards, steel works and mines et al closed,” he said.
“Furthermore, the offshoring of manufacturing will be reversed by the pandemic as we move from just-in-time to just-in-case inventory management. Companies will also be motivated to re-shore because it will increase their ESG score.”
As a result, he believes there will be a renaissance in UK car manufacturing (including electric) and the “come-to” economy that has thrived under successive lockdowns will continue to play an important role due to the high penetration of internet shopping in the UK.
Covid-19 has made it difficult to think unequivocally, but it’s also currently difficult to find evidence that the UK housing market will have anything other than a positive year in 2022.