Are you looking to upsize to a bigger home in 2022? Perhaps you are feeling ready to relocate to a larger property with more living space and a garden. If that’s the case, you are not alone. A recent study revealed that half of Brits would move to a bigger home if given the chance.
However, it seems making such a move may be easier said than done at the moment, if recent housing market data is any indication. Here’s why homebuyers looking to upsize in 2022 might have a harder time doing so.
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What has happened to the UK property market?
It’s no secret that the UK property market has been on fire recently. The last two years have seen house prices reach new highs more than once.
According to Halifax, one of the main driving factors behind the UK housing market boom has been a surge in buyer demand for detached properties.
Research shows that the cost of a detached home in the UK has risen by around 17%, or £60,556, since March 2020. As of December 2021, the average cost of this type of property was £425,177.
Wales and the North West have witnessed the biggest rises in detached home prices, at 24.4% and 21.9%, respectively.
Russell Galley, Managing Director at Halifax explains why this might be the case: “As employers began to crystalise longer-term plans for home and hybrid working, buyers have been able to consider homes further afield as the need to commute falls away, with properties previously considered too remote now giving families extras like garden rooms and home offices.
This trend means Wales, with its beautiful countryside and lower relative property prices, saw the strongest growth in detached homes over the past two years.”
But what about other property types? The data from Halifax shows that flats have risen at about half the rate of detached homes (9%), or £13,325.
Meanwhile, the average value of a semi-detached house has increased by £36,841 (or 15.1%), while that of a terraced house has increased by £27,715 (or 14.9%).
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Why could homeowners struggle to upsize?
The most concerning outcome of the UK property boom, according to Halifax, is the widening of the gap between each type of home in terms of price. This means that those people with smaller homes who are hoping to upsize might find it even harder to do so.
For example, Halifax estimates that flat-owners hoping to upsize to a terraced house will now have to spend an extra £54,806 compared to £40,416 in March 2020.
Those who currently live in a terraced house would need to spend an additional £66,292 to upgrade to a semi-detached house, compared to £57,166 before.
And if you want to move from a semi-detached house to a detached home, you’ll have to pay an extra £145,087. This is nearly £24,000 more than what you’d have had to pay to upsize in March 2020.
Is there a silver lining?
Moving to a bigger home usually means borrowing more by taking out a bigger mortgage.
There is a silver lining, however. You may have built up a good amount of equity in your current home, especially in this booming market. Equity refers to the difference between your home’s current market value and the money that you still owe on it.
This equity can serve as a part or even full deposit for your new, bigger home. Of course, you may still need to contribute more money from your savings depending on the property price and other costs, such as Stamp Duty and home insurance.
But what if you don’t have enough equity to fund the deposit for your next home?
Well, you may be eligible for the government’s mortgage guarantee scheme. This scheme allows both first-time buyers and existing homeowners to get a mortgage with just a 5% deposit.
Basically, the government provides a guarantee that it will compensate the mortgage lender for a portion of the net losses suffered in the event of repossession.
Note, however, that to qualify for this mortgage, the home you’re buying must not be worth more than £600,000. You will also need to pass the usual mortgage affordability checks and have a good credit score.
So, while moving to a bigger home might be a little harder and more expensive this year, it’s not impossible. Homeowners still have options.
