Property rose by £24k in 2021: what’s the house price forecast for 2022?

Nationwide’s latest House Price Index suggests that a typical home in the UK now costs £24,000 more than a year ago. So how will property perform in 2022?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Row of terrace houses.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Nationwide’s latest house price index shows that the price of a typical home has risen an enormous £24,000 since the beginning of 2021.

So what else does the index reveal? And how high (or low) will house prices go in 2022? Let’s take a look.


What did the latest House Price Index reveal?

According to Nationwide, the average house now costs £254,822. This is £24,000 or 10.4% higher than a year ago. December alone has seen 1% added to the value of a typical house. This is despite the fact that the market traditionally cools towards the end of the year.

The report also reveals that Wales has witnessed the highest house price inflation in 2021. The cost of an average home in the principality now stands at £196,759. This is 15.8% higher than a year ago.

London has been the region with the slowest house price growth. The average home in the capital now costs £507,230, which is just 4.2% more than a year ago. This suggests that house prices in London are rising slower than the rate of inflation.

To sum up its final House Price Index of the year, Nationwide says the 10.4% growth in house prices is the biggest seen in a calendar year since 2006.

What does Nationwide say?

With the release of its latest Index, Robert Gardner, Nationwide’s chief economist, highlights how house price growth has remained strong. He explains, “Annual house price growth remained in double digits in December at 10.4%, making 2021 the strongest calendar year performance since 2006. Prices rose by 1% month-on-month, after taking account of seasonal effects.

“The price of a typical UK home is now at a record high of £254,822, up £23,902 over the year – the largest rise we’ve seen in a single year in cash terms. Prices are now 16% higher than before the pandemic struck in early 2020.

“Demand has remained strong in recent months, despite the end of the Stamp Duty holiday at the end of September. Mortgage approvals for house purchases have continued to run above pre-pandemic levels, despite the surge in activity seen earlier in the year. Indeed, in the first 11 months of 2021, the total number of property transactions was almost 30% higher than over the same period of 2019.”

Gardner also comments on the fact that the number of homes for sale remains low. He explains, “The stock of homes on the market has remained extremely low throughout the year, which has contributed to the robust pace of price growth.”


Where will house prices go in 2022?

Despite the extraordinary surge in values during 2021, Nationwide’s Robert Gardner suggests house price inflation will slow in 2022. He explains, “It appears likely that the housing market will slow next year, since the stamp duty holiday encouraged many to bring forward their house purchase in order to avoid additional tax.

“The Omicron variant could reinforce the slowdown if it leads to a weaker labour market. Even if wider economic conditions remain resilient, higher interest rates are likely to exert a cooling influence. Indeed, house price growth has outpaced income growth by a significant margin over the past 18 months and, as a result, housing affordability is already less favourable than before the pandemic struck.”

Gardner also admits that the current environment is difficult to predict. He explains, “The outlook remains extremely uncertain. The strength of the market surprised in 2021 and could do so again in the year ahead. The market still has significant momentum, and shifts in housing preferences as a result of the pandemic could continue to support activity and price growth. Indeed, the Omicron variant could serve to reinforce the shift in preferences in the near term.”

Gardner’s opinion that house prices will slow in 2022 is echoed by the Royal Institution of Chartered Surveyors. The trade body suggests that house prices will end 2022 just 3%-5% higher.

According to Tarrant Parsons, senior economist at RICS, while housing activity is likely to slow in 2022, the UK’s shortage of housing stock is unlikely to be resolved any time soon. He explains, “Despite more homeowners seeking more space and various incentive programmes, transaction activity for the coming 12 months will inevitably slow.”

“The major challenge will be around the lack of stock on the market with inventory back close to historic lows, and shows little sign of easing.”

Are you looking for a mortgage?

Whatever your thoughts on the property market, if you’re on the lookout for a mortgage, see our list of top-rated mortgage deals.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »