Owner’s Guide to the Real Estate Market in 2022

While other sectors have been hit hard by the pandemic, the real estate market has defied most forecasts. As if this weren’t already a favorable situation for those investing in real estate, the UK quickly recovered from one of the worst economic performances and the government supported the industry with the Stamp Duty Holiday .

But what will happen to the real estate market in 2022? Will real estate prices continue to rise? And what will be the impact of a rise in interest rates? First of all, it’s important to understand a few key economic metrics to assess what’s likely to happen to the real estate market over the next year. The factors include:

Gross domestic product: It fell 9.8% in 2020 but is expected to rise 6% in 2022, after increasing 6.5% in 2021, bringing us back to pre-pandemic levels.

Unemployment: The fear was that unemployment will increase at the end of the leave, however, the expected unemployment rate after the leave will be around 5%, the upper limit of the average of 3 to 5%. This is good news, as falling unemployment is supporting a healthy real estate market.

Wages: An increase in the minimum wage and better tax relief for people on the universal credit returning to work, coupled with general wage increases, will support rental income levels.

Inflation: The government’s target inflation rate is around 2%, but the forecast for 2022 is expected to be double, so this is one of the only areas of concern. This is due to several factors including a labor shortage, rising energy bills and rising food prices.

Interest rate: In January 2022, the Bank of England’s base rate was just 0.25%, making mortgage rates one of the lowest on record. However, these rates are typically used to control inflation, so expect the era of ultra-low rates to end soon.

Confidence: Upbeat news typically influences buyers and sellers, so the positivity surrounding the economic rebound should continue to keep the housing market stable going forward.

Growth in real estate prices

Continued good news in the sector means that many forecasts predict that house prices will continue to rise in 2022. Capital Economics suggests that house prices will increase by 2.5% in 2022, bringing us back to growth rates ” normal ”before COVID. Meanwhile, Price Waterhouse Coopers (PwC) is more bullish in its forecast, suggesting prices will rise 1% to 4% in 2022.

Real estate prices are expected to continue to rise due to:

  1. High levels of equity
  2. Demand exceeds supply in many areas
  3. Rising wages, allowing people to borrow more money
  4. Mortgage financing remains plentiful and affordable, even with expectations of rising interest rates
  5. The desire of consumers to have the kind of home they really want, which compensates for any lack of confidence in the economy.

It is important to remember that these factors vary by region. For example, prices in London have not worked as well as in the past. When the pandemic hit, demand fell relative to supply and mortgage borrowing became tight, especially for first-time buyers. And when those at the bottom of the chain can’t afford to offer that much, it tends to control prices down the chain. In our experience, only your local expert agent can advise you on supply and demand, as it may differ even from route to route. It can also vary depending on the type of property – for example, one-bed apartments can be extremely popular in some areas, while in others they can be single-family homes with five beds.

Rents are on the rise – mainly

Rents have risen significantly since the second quarter of 2020, rising 2.1% in the second quarter of 2021. If you remove London from the figures, the average rent has risen 5% year on year, a 13-year high. This contrasts, however, with the capital, where rents decreased by 3.8%.

Looking to 2022 and beyond, with inventory constraints similar to the homeowners market, wage increases are expected to continue at all income levels and the economy recovering strongly, rents are expected to continue to rise. increase – great news for existing and new owners.

What do rising prices and rents mean for property owners and investors?

Forecasts can be helpful in understanding what might happen in the real estate market and how the industry and other buyers and sellers will react, but it’s important to remember that these are only forecasts. Regardless of what these markets say, there are always individual “deals” to be made; they may simply take more time and diligence to spot.

Like any financial endeavor, the real estate investment market will naturally rise and fall over time, but for those who can invest for the long term and “get through” any temporary downturns, having real estate as part of your plan. investment strategy can really help you achieve your financial goals.

However, in today’s world with supply and demand being so specific to an area, simply buying just any property on any street will not necessarily translate into a real estate investment. successful, as was the case in the 90s and early 2000s. In fact, it’s quite the opposite – unless you plan carefully and follow expert advice, it’s all too easy to end up with something that will end up costing you money, rather than growing your business. heritage. It is therefore essential to seek advice from a professional local real estate agent, a mortgage broker with experience in buy-to-hire, a good legal firm and an excellent land surveyor.

Our full Real estate market forecast 2022 covers the following in more detail:

• Price forecasts, including supply versus demand, capital levels and availability of mortgages
• Rental forecast for 2022
• Transaction levels – and is now a good time to buy?

Download your copy of the Real estate market forecast 2022 today.

At Leaders Romans Group, we can help you put you in touch with our real estate experts. If you would like advice or have specific questions about your real estate investment or one of our services, please do not hesitate to Contact us.