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The UK property market in 2022: four things to watch

A price rise that defies gravity


Market valuation appraisals, a leading independent appraisal company, found that the number of UK sales instructions in November and December surged by 7% compared to the average between 2015 and 2019.


The market had indicated in recent months that exceptionally strong levels of demand would be more evenly matched by supply in early 2022, which would give downward pressure to the price growth we have seen lately. Does this still seem likely? And what about #Omicron's trajectory?


We may become more familiar with the tail end of the Greek alphabet if new variants emerge, but with each piece of encouraging data about the potential for hospitals to handle the current wave, the answer seems more like a 'yes'.


As it stands, the pandemic is the most important thing to keep an eye on this year - perhaps even more closely than anything else.



Risk of a lockdown


Covid-19 has largely become a question of sentiment in the UK housing market, as evidenced by the lackluster end to the furlough scheme.


The sense of certainty that buyers and sellers will be able to plan independently without a sudden change of direction may begin to materialize in the next few weeks.


Those who act quickly will be benefited initially - we have explored the benefits of listing in #January closely.

As interest rates normalise, that will inevitably dampen demand and price growth as mortgage rates also normalise.

At the same time, we should keep in mind that the current base rate of 0.25% is lower than the level of 0.75% in March 2020, when it was still considered historically low.


Let's hit the brakes


It's unlikely that rates will rise precipitously in the short term, so the short-term effect will be more like dabbing the brakes.


Inflation, which some economists predict will reach 9% this year, differs from now and early 2020, however. This will further curb demand and house prices and increase pressure on the leading Banks to raise rates more quickly if inflationary pressures become less transitory.

The five-year swap rate last week was the highest it's been since November 2018, indicating what financial markets expect to happen to borrowing costs.


Last but not least, the return of international travel will impact the UK residential property market this year, particularly in prime areas of London and the Home Counties.


Buyers from overseas


After the Omicron variant, the government has recently eased regulations around testing for international travel, and it has ended what had become an increasingly futile ban on arrivals from countries including South Africa.


While both of these measures have been welcomed by the travel industry, we have explored before that the relaxation of travel regulations in the UK has not yet led to a return to normal for overseas property buyers.

International demand is likely to recover more noticeably in the second quarter of this year, barring any unforeseen news variations. Seasonality and the erratic path to recovery will continue to have an impact on international demand.


For the second year in a row the UK property market should, somewhat counter-intuitively, experience strong growth on all four of these measures provided we don't stray too far from the present trajectory.

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