In a year that remained largely overshadowed by Covid uncertainty, we saw a consistently resilient property market continue to post extremely strong levels of house price growth. The latest UK House Price Index shows house prices are 11.8% higher than a year ago, the third month we’ve seen a double-digit rate of annual growth in the last four months alone.
This was driven by the continued affordability of borrowing with interest rates remaining around record lows. A push for bigger homes also helped boost house prices as we searched for more space in the wake of numerous national lockdowns, with detached homes now 13.8% more expensive than this time last year - the largest jump of any property type.
The most influential factor was no doubt the stamp duty holiday, which spurred a relentless tide of buyers entering the market in search of a new home and a stamp duty saving. But perhaps the biggest surprise of the year was that when it ended, the market cliff edge that was so widely talked about within the media amounted to little more than a small pothole in the road.
Although the annual rate of house price growth did dip by a notable 5.3% in July in the run-up to the initial deadline, we saw the market immediately rebound in the months that followed to post some of the strongest figures for the entire year.
All of this points to a property market that is not only in full health but moving under its own momentum and this shows little signs of changing.
Over the coming year, we believe that the market will remain robust and that even the threat of an interest rate increase is unlikely to topple the positive price trends seen in 2021. Of course, it would be unrealistic to expect the market to continue at such a pace and a greater return to normality in 2022, coupled with the festive break, should see the current rate of house price growth shift down a gear or two.
A further three to four per cent is a fair expectation for the UK market overall but of course, this will be very much dependent on where you live and the type of property you live in.
We do expect the London market to surpass the rest having trailed much of the UK where house price growth is concerned over the last year to 18 months. We’ve already seen the capital start to awake from its pandemic property market slumber with a return to the office and the growing demand from foreign buyers all helping to cultivate early signs of house price prosperity.
As a whole, growth in the region of five per cent in 2022 is a realistic benchmark, while the return of the prime London market will see London’s most prestigious neighbourhoods benefit to the tune of between seven and nine per cent in house price growth.
There’s no doubt that the current threat of Omicron may stifle domestic demand throughout the first quarter but London’s top line property market health lies with the demand from foreign buyers pushing the market across its very top tiers. This momentum is really starting to build and in recent months we’ve seen a very sharp increase in enquiries from foreign shores as travel restrictions have eased.
As long as there is no blanket ban on travel as we saw previously, this demand will continue to convert and the London market will find its feet again very soon indeed.
