The COVID pandemic resulted in a spike in house prices and a buying spree for 18 months. However, experts are now unsure whether it will end the house price boom in 2022 or not.
According to Halifax, property prices in the United Kingdom increased at a quicker pace in 2021 than in any calendar year since 2004. However, when it comes to London, it is a bit different. According to HM Land Registry statistics, the average London property was worth £519,934 in November 2021. The monthly price rise in London was just 0.2 per cent, and yearly price growth was only 5.1 per cent.
It is important to note that regional property markets continuously outperformed house prices in London throughout the pandemic. With the typical property in London now costing roughly £520,000, affordability and, therefore, the price increase is being curbed.
.In spite of the fact that there is still a great deal of uncertainty about the market’s future, we anticipate that prices will continue to climb in 2022 but at a slower pace than in 2021 as market circumstances begin to normalise. However, consistent upward pressure on the cost of living represents the most important threat to the forecast.
The Return of Home Buyers In London
The pandemic has dominated the property market for over two years. The initial lockdown drove those families who were already contemplating leaving town. This demand pushed up competition and prices for properties in lush outer London neighbourhoods and beyond.
In 2022, demand will grow when workplaces reopen, international buyers and students return, as well as first-time purchasers who want to be near work and friends.
More Houses On Sale Will Meet The Demand
In a normal housing market cycle, this rush of demand would result in a significant increase in the value of homes. However, it isn’t the case with London. Experts believe that it is expected there will be an increase in the number of individuals who are ready to sell their houses. More homes are being listed as people have more confidence that the danger of Omicron will recede in the near future.
So, if the transition from Omicron is as seamless as possible, more houses will be advertised [and constructed], and the spike in prices will be less dramatic.
The Problems In The Form of Rising Inflation And Interest Rates
Mortgage bills have increased for millions of homeowners as the Bank of England shocked everyone by increasing interest rates to 0.25 percent. It came as a huge surprise because the official inflation rate has soared to 5.1 percent, the highest level in 10 years.
We believed that the increase in energy costs and inflation would be somewhat temporary (as if we haven’t seen them before). However, it does not seem to be the case at this time, and as a result, we anticipate further interest rate hikes to occur this year.
The most pressing problem for Londoners looking to purchase their first house in the city is affordability, which predates the Covid-19 financial crisis. Therefore, it could also prevent a runaway price increase.
The Case of Uncertainty
It is too soon to predict what could happen. House prices might grow or decrease by greater margins in 2022, depending on how Covid-19 and its variations continue to affect the economic climate, as well as the possibility of new governmental interventions.
