The New Year’s bounce in buyer demand in 2022 was the strongest seen in at least five years.
Rising demand in the first few months of the year was expected – the bounce back after the festive lull is an annual fixture of the property buying calendar.
A rise of 50%, however, compared to usual levels of activity seen at this time of year was a much stronger start than anticipated.
Although the chance to save thousands of pounds in stamp duty on higher value transactions like family homes has ended, influencing factors such as the pandemic-fuelled search for space and changing working patterns are keeping demand for larger properties high.
Which types of property are most popular at the moment?
Our December House Price Index Report showed that three-bedroomed houses, which topped the list of the most searched for property type in the first half of January, also ranked as the most listed property type over the same period.
The sharpest New Year rise in demand for houses can be seen in outside London, followed by houses in London and the boroughs. The suburbs of Birmingham and Glasgow, Thurrock in Essex and Barking and Dagenham were the front running areas.
Family homes, however, aren’t the only sought-after property. The flats market is making a comeback.
After falling out of favour throughout much of the pandemic, a resurgence of international interest, the return of workers to cities and the much slower pace of price growth over the last 12 months has re-energised the flats market.
Value in the flats market
Compared to other property types, our residential property data shows that apartment price rises have been much more subdued over the last 12 months creating an opportunity to find value.
In the London flats market, this year’s post-Christmas bounce has beaten January 2021. The sector is now experiencing its highest level of average demand since April 2020.
Little has changed in the pricing of London flats over the last 12 months in contrast to the average price of a semi-detached house, for example, that rose by 6%.
Outside of London, flat prices rose on average 1.9% last year across the UK’s 20 major cities. This compares to an 8% rise in the price of detached houses.
With value to be found, appetite for apartments outside of London has rocketed making it the strongest January for this market in at least four years.
Which property buying groups are most active at the moment?
The return of international travel since the relaxation of the Covid-19 rules has been a boost for the flats market, particularly in the Capital which attracts large amounts of foreign investment.
Agents have told us that not only have they seen a rise in demand from foreign investors but in overseas buyers who are looking for a place to live, drawn by the flexibility of a rental option as well as a pied-à-terre.
The re-opening of company premises and a shift towards a hybrid style of home and office working has seen workers return to cities, adding to demand for apartments.
Green shoots of housing supply recovery
Supply remains constrained after 2021 became a bumper year for house sales when 1.5 million transactions took place. That’s the highest level of sales activity seen in any year since before the financial crisis.
Activity from first-time buyers and investors who took advantage of high LTV mortgages and stamp duty savings increased. This rise in pure demand eroded the supply of homes for sale even further.
But there are indications of green shoots ahead.
Comparing stock levels to a five-year average, the HPI property data pegs current supply at 44% lower which is a slight improvement than the -47% measured in late 2021.
What’s more, new supply coming to the market is tracking usual levels for this time of the year and some agents have reported a jump in valuation leads during the first few weeks of January.
Proactivity is also on the rise among agents whose vendors are struggling to find a home to move to. Sales agents are becoming more hands in finding new listings as they try and smooth the process for their customers.
The impact of the housing market right now on house prices
House price growth slowed towards the end of year. Average house prices increased by 1% in the three months to December taking the rate of annual growth to 7.4% down from 7.7% in September, dwarfing the 4.2% rise seen in 2020.
The value of an average home rose by £17,000 last year to £242,000 while more than 6.5 million homes saw price rises of £30,000 or more.
Economic headwinds such as inflationary pressures that will squeeze household budgets and lead to further interest rate rises will act as drag on house price growth this year.
Any increases in interest rates, however, will still see the cost of mortgage borrowing remain relatively cheap.
The ongoing imbalance between demand and supply will continue to put upwards pressure on house prices which is why we’ve forecasted 3% annual price growth and 1.2 million transactions in 2022.