Will House Prices Drop in 2022?

18th March 2022

The latest property market news has been saturated with talk about the cost of living crisis, alongside record levels of buyer demand meeting a limited supply of houses. Despite an active market, many financial outlets have reported that it’s becoming even more difficult for prospective homeowners and first-time buyers to get a foot on the property ladder – with the latest UK House Price Index showing record levels of price rises, marking an increase of up to £27,000 a year as of December 2021.


With the average house price peaking, we understand that navigating the journey to your new home can feel daunting. Here at JonSimon Estate Agents, we’ve helped thousands of people put their property up for sale since 2008, offering trusted advice and insights at each step of the process – no matter the market momentum.


In this blog, we’ll discuss the latest news on the adjustment in house prices, and what it means for you – whether you’re longing to finally get your hands on the keys to your first home or are selling up and moving on to pastures new.


Why are house prices rising so much?


With every house price boom, there are multiple factors that contribute to rate rises and pressure on the market, especially in the financial world. According to Natwest, in its capacity as a mortgage lender, last year saw the biggest cash increase in house prices since 1991, influenced by a lack of available properties versus the sheer demand.


As of February 2022, the average price of a house in the UK climbed to a record high of £278,123 – up by 10.8%. In that month alone, house price growth increased by 0.5%, making it the strongest annual rise in 15 years, notes Forbes’ property report.


We are now also starting to see the effects of the Government’s Stamp Duty Holiday scheme, which came to an end in September 2021. The Stamp Duty, paid on tax that increases with a property’s value, reduced from June 2020 to July – but the process was completely stopped in October 2021. As many people saw this as a golden opportunity to buy bricks and mortar without the added tax, the market was stimulated and demand shot up.


The topic of supply and demand is fuelled by multiple economic and social factors. We live in a country of proud homeowners, where more people are keen to get started on the property ladder. The rate of homeownership is declining due to this gap in available property, alongside second homeownership, an ageing population opting to stay within their homes, the resurgence of private rentals, and a new generational preference to rent.


Although housing prices are on the up, the popularity of the buy-to-let market has also continued to soar – causing competition on the housing ladder. As property is noted as a solid investment with good returns, we’ve seen hundreds of people make their first steps – or build their portfolios – in this rapidly developing sector, with over £36 million worth of buy-to-let mortgage approvals taken out in 2019 alone.


Despite all these factors, including the supply and demand shortage, the Bank of England says record-low interest rates have driven the housing market. For more than a decade, rates have been at rock bottom, with an all-time low of 0.1%, which made home loans incredibly cheap. A rise in inflation in 2021 prompted the Bank of England to raise the base rate to 0.25%, and in February 2022 it increased it again to 0.5%. Further increases are expected throughout 2022.


Has the Coronavirus pandemic had an impact on prices and the housing market?


As much as we’d love it, even the most seasoned estate agent or mortgage brokers can make a sure prediction on property price growth. At the beginning of the COVID-19 pandemic, the Bank of England warned that house prices could fall by 16% – which made homeowners begin to assess their options and prepare for the worst. But looking at figures from the Halifax House Price index, the housing market was up by 9.8% in 2021 – despite the huge hit taken by the UK economy.


Alongside the stamp duty incentive and buyers’ unprecedented ability to save during lockdown, activity was driven throughout 2020 and 2021. Notably, Nationwide found that the price of a regular home was 20% higher than it was against the same month just before the start of the pandemic, marking the equivalent of a £44,000 increase.


So, what prompted this moving ‘mass exodus’? As the country shifted from office commutes to remote or hybrid working, the so-called Race for Space was further boosted – with the demand for larger properties increasing drastically. There was also a greater buyer demand for houses in rural and coastal locations, with house prices looking to increase between 2022 and 2024 in desirable areas as a result of this COVID trend.



What will housing prices look like in Ramsbottom, Burnley and Radcliffe?


Looking onwards into 2022, it seems that housing prices aren’t going to drop anytime soon. Throughout the areas we operate in, we saw increases in property prices across the board: with the average price per home in Burnley coming in at £114,732, £171,988 in Radcliffe, and £261,331 in Ramsbottom.


As we are unsure what the continued impact of the pandemic will have on the property market, alongside other economical factors, it is likely that prices will continue at their current levels. But according to Russell Galley, Halifax’s Managing Director, ‘growth will be broadly flat during 2022 – in the range of 0% to 2%.’


To counteract these effects, such as higher inflation and interest rate increases, 95% mortgages are available to first-time buyers again this year. A focus on properties being built or revamped with higher conservation ratings to combat rising energy bills is also being pulled into the frame, worth up to £40,000 more than their less sustainable counterparts, according to Lloyds Bank.


Our industry and policy leaders will continue to focus on how we can help more people get affordable and quality housing, as the Built Environment Committee of the House of Lords has called for the removal of barriers to housebuilding, particularly for SMEs.


Although we cannot say for sure what is coming up for us in 2022, you can count on JonSimon Estate Agents to be by your side during your next step on the housing ladder – whether that’s to buy, rent, or as a landlord. We also offer trusted advice from over ten years of experience in the housing market across Burnley, Ramsbottom and Radcliffe, straight from the minds of our dedicated team. Get in touch with us today.

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