After more than a year of soaring prices, interest rates and energy prices, the economy has entered a state of flux.
However, the real estate market still defies expectations. Despite forecasts of a summer slump, the average house price hit a sixth successive high in July, hitting £369,968, according to the Rightmove index.
Amid this growth, how will the rest of 2022 unfold? Will the much-discussed post-summer crisis take place? To help get you through another tough year, I’ve reviewed Leaders Romans Group (LRG) client trends to discuss what we’re planning for the rest of the year.
Four trends we expect to see
1. We won’t see real estate prices fall dramatically…
Fears of a “burst bubble” are unfounded. We are not seeing a significant drop in buyer interest and despite higher mortgage rates, demand remains stable.
Following the 2021 stamp duty-driven moving frenzy, there is still a striking mismatch between supply and demand for properties, with the housing stock particularly low.
2. …But growth will remain static
While we won’t see any rapid price increases or huge price declines in the rest of 2022, we do see signs of stabilization in house prices. Given the impact of Bank of England (BOE) interest rate hikes on home buyers, house price growth appears to remain relatively stable for the rest of the year, the cost crisis of life likely to have an impact on the number of houses sold.
We expect slower growth, but no significant decline in the medium to long term.
3. We will see a mortgage rush
Mortgage interest rates have risen rapidly in 2022 following five BOE base rate increases. When interest rates change, it always creates a wave of new demands, resulting in a backlog.
We expect to see people looking to buy or remortgage over the next six months trying to get a mortgage rate as soon as possible to avoid further rate hikes. Those without fixed rate mortgages are expected to be hardest hit.
4. The North West will prosper
Despite a general cooling, LRG continues to see house price inflation in the North West and we expect to see continued house price growth in the region for the remainder of the year.
The North West is an area that has a particular imbalance between supply and demand, with Liverpool and Manchester being two of the main cities for property demand, driving up the value. Outside the major cities, demand for properties in Warrington in particular has seen growth of up to 70% above the five-year average, while Oldham follows at 65% and Preston at 60%.
As Rightmove data for July 2022 shows, the region is seeing an 11.2% YoY increase in house prices from July 2021, as well as a 0.8% YoY increase from July 2021. June. This compares to zero per cent growth in the South East and a 2.9 per cent decline in Wales.