March 2022 UK Housing Market update
The last 6 weeks have seen notable events that have had an impact on the UK economy in general. War in Ukraine, an increase in the Bank of England base rate and the Spring Statement “mini-budget” from the UK government. On top of the cost of living crisis developing in the UK, you’d be forgiven for fearing the worst for the UK property market.
However, Zoopla’s report for February average house prices shows an 8.1% year-on-year increase, whilst Nationwide, reporting on the March market, are showing a 14.3% rise. Evidently, the market is performing strongly, despite the mounting pressure on household finances.
Why is the housing market so strong?
There are a number of factors at play.
Firstly, the UK’s continuing imbalance between supply and demand is not going to be addressed in the short term. Although Zoopla points to a +5% flow of new supply for the 4 weeks ending 20th March vs the 5-year average, this barely addresses the gulf between the demand for houses and the supply.
Demand itself continues at a high level, with homebuyers still recalibrating their housing needs following two years of Covid-prompted hybrid working and the “search for space”. This is likely to continue for another few months as we’re entering the traditional start of homebuying season.
Regional variations
With a national house price increase of 8.1% yr-on-yr, Zoopla shows the usual regional variations. Wales continues to be the region with the greatest house price increases year-on-year, registering a growth of 11.8%. This is followed by the South West at 10.1% and Northern Ireland at 9.0%. London sits at 3.2%, which is further acceleration from its pandemic performance.
In terms of cities, Liverpool leads the way at 10.3% with Nottingham (9.5%) and Manchester (9.2%) close behind.
Future forecast
Most commentators predict a slowing down of the housing market in the coming year. Of course, this has been the prediction for the last 6 months and it’s yet to truly manifest itself!
However, the economic headwinds are starting to suggest it’s inevitable. The rising cost of living, an increase in interest rates (and thus borrowing costs) and general global uncertainty are sure to impact the UK housing market to some extent.
Nevertheless, analysts agree that this will likely only be a return to more “normal” levels, rather than any set back. After all, the levels of growth and demand seen over the pandemic, don’t appear to be sustainable indefinitely.
It should be noted that the 40-year trend in UK house prices is one of constant increase. This won’t change in the mid-term. And, although higher interest rates are expected, they will be nowhere near historic highs.
Remember, if you’re looking to invest in UK property, it’s still a great time to do it. Plus, in conjunction with our in-house mortgage department, we can still help you secure excellent rates on borrowing. Get in touch today to see how we can help.
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