Binoculars housing market prediction

Zoopla sets out its top predictions for the UK housing market in 2022

After the events of 2020, 2021 was a difficult year to predict in the housing market. Now more stability is returning to the country, we look at Zoopla’s forecast for the year ahead.

More than a fifth (22%) of households plan to move over the next 18 months as a direct result of the pandemic, it has emerged. In a survey by Zoopla, those most likely to move were younger people who live in cities, suburbs or large towns, and those whose working patterns have permanently changed. Many plan to move to other cities and towns, while some hope to switch to a more rural lifestyle.

The report shows a continuing shift in attitudes towards what people expect from their homes, and could influence housing activity over the course of 2022. In fact, according to Zoopla, the main drivers for the sector will be “an ongoing re-evaluation of housing needs, increased housing equity and moves in parts of the labour force to more hybrid working.”

Price predictions across the housing market

The property portal’s research forecasts a +3% increase in UK house prices over the course of 2022. This is across a predicted 1.2 million housing transactions.

The firm expects the house price gains seen over the past year to bring more sellers to the market in the coming months. However, a continued low supply will support price inflation. It points out that housing remains affordable in many markets, and competition among mortgage lenders will also keep rates low, leading to continued strong appetite in the sector next year.

Zoopla notes that the “artificial” rush caused by the stamp duty holiday this year will also mean we see activity continue to taper off. This factor will also not repeat itself in 2022, which is why there could be up to 20% less transactions across the housing market next year, albeit still at a strong level historically.

North-west versus London

As always, there will be polarisation across the country, with the biggest price hikes expected to continue in the north-west‘s burgeoning housing market at +4%. London remains the slowest part of the country, with rises forecast to be around +2% over the year. These increases forecast overall are more sustainable, says the report.

Delving deeper into regional variations, the report says: “We believe there is headroom for further, above average house price inflation in regions outside southern England. However, while affordability levels have improved by 10% in London since 2016, affordability remains well above the long run average – this will continue to limit level of price rises in the highest value areas of London and southern England in 2022 and beyond.”

Right now, towns such as Blackburn and Rochdale in the north-west are seeing price growth of more than 10%, says Zoopla. And in Zoopla’s city index for house prices this month, looking at September, the likes of Liverpool and Manchester are leading the way for the whole of the UK with annual house price rises of 10.4% and 8.7% respectively.

Will borrowing costs increase?

The Bank of England base rate remains at a record low of 0.1%, but most experts expect this to rise in the relatively near future. This is likely to have a knock-on effect on mortgage rates, and is one of the reasons buyers who are on the fence might want to invest sooner rather than later to secure cheap borrowing.

As Zoopla notes, buyers have become accustomed to low mortgage rates. The portal predicts rates will reach an average 3% by the end of 2022. This would be the highest since 2015, but still historically low.

However, the prediction is that this will not have a major impact on the price buyers could pay for homes. It could deter certain would-be buyers and impact sales, though, says the report. But for existing borrowers, a large number of which have secured long-term fixed rates, there will be some protection from rate rises.

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