The UK property market has experienced its biggest new year rebound in five years, with demand for all property types in the country rising exponentially in January. This is according to the latest UK House Price Index from Zoopla. The index shows that demand is up by almost 50% compared to usual levels for this time of year. So what could this mean for house prices going forward?
Let’s take a look.
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What’s happening with housing demand?
According to Zoopla, demand for property in the UK was up 49% in the four weeks to 16 January 2022 compared to the average for the 2018-2021 period.
There was record demand for all property types, including flats and houses. Zoopla says that the increase in demand was actually on par with the record levels of buyer interest seen during the Stamp Duty holiday, which came to an end in September.
Three-bedroom homes outside London were the most sought after properties. The demand for these homes was four times higher than the five-year average.
There was also the highest level of demand for flats in five years. Zoopla attributes this to the return of city workers to offices, relative affordability and demand from overseas buyers.
What about supply?
One big theme of the UK property market during the pandemic has been the low supply of homes for sale. Though supply continues to be outpaced by demand, things seem to have improved slightly.
Zoopla reports that while the number of homes for sale is still 44% lower than the five-year average, this is an improvement from the end of 2021 when it was 47% lower.
Furthermore, Zoopla says that there is now more balance in the types of homes available, meaning there is a stronger correlation between the types of homes buyers most want and those that are available for sale.
This balance is best for three-bedroom houses. They are currently the most in-demand type of property as well as the most available.
Zoopla reckons that the slight upturn in overall supply could be because buyers are keen to make a move before interest rates potentially increase again. Higher interest rates could make buying a home more expensive. Many buyers are therefore currently listing their current homes to be able to buy their next one as soon as possible.
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What’s next for house prices?
House price growth continues to be strong. However, as Zoopla points out, the annual growth rate appears to have peaked, dropping to 7.4% in the three months to December from 7.7% in September.
This growth could slow even further as the market returns to more normal conditions and more economic headwinds are found.
That being said, the effects of the pandemic are still being felt. The ‘race for space’ is still in full swing and the significant imbalance between demand and supply remains. Such factors are likely to put upward pressure on house prices.
As a result, house prices are expected to end the year 3% higher than they are currently.
What’s else do buyers need to know?
Are you looking to buy a property in 2022? The good news is that supply is increasing, meaning that you will have more choice. However, demand is still outstripping supply, which means that competition for available properties is still likely to be fierce. So, how can you get ahead of the field and beat this competition?
The trick, according to the experts at Rightmove, is to become a ‘power buyer’. A power buyer is someone who is in the strongest possible position to buy. They already have a buyer for their current home, are chain free, or do not need to sell in order to buy.
A few top ways to become a power buyer include:
- Getting a sales agreed on your current home before you buy
- Getting a mortgage in principle if you are a first-time buyer
- Letting your agent know if you are a cash buyer
Aspiring buyers should keep in mind that house prices are still hovering around all-time highs. This essentially means that if you take the plunge, it’s more than likely that you will have to pay a premium for your home.
