According to the latest Zoopla House Price Index, this year, the property market has been at its busiest for over a decade.
An unusual set of economic circumstances has prompted the flurry of activity in 2021. Pandemic restrictions led to a dramatic upturn once lockdown rules were eased.
But there have been other factors at play that have also led to the current state of the UK property market.
Low supply and high demand
The lows, followed by highs, of activity prompted by lockdown phases has been on a backdrop of a market that already had a low supply of housing and strong demand from buyers.
This produced a sellers’ market, with the number of property listings dropping to the lowest levels since Zoopla’s records began. Buyer demand is currently 28% above the five-year average, while the number of homes for sale is 42% below.
With this severe shortage of properties for sale, competition for limited homes pushed up house prices.
House prices rose in 2021
According to Zoopla’s data, the average price of a UK home is now £240,000 compared with the cost five years ago of £200,000.
Figures show that house prices increased at an annual rate of 6.9% in October, which is twice the 3.5% recorded rate in the same month in 2020.
2021 has seen £15,500 added to the value of a typical property as buyers look for bigger houses, partly, perhaps, in reaction to having spent more time at home during the last two years.
There’s robust demand from buyers for 3 and 4-bedroom family homes, and they’re also searching for properties in commuter zones and rural areas.
How will 2021 compare with 2022?
This year, one in every 16 privately-owned properties is estimated to have changed owners, making it the busiest year for the housing market since 2007. The stamp duty holiday also played its part and led to increased activity.
The speed of property sales rose as homes took an average of 26 days to sell, whereas in 2019, they took an average of 49 days.
As we go into 2022, we face the same situation of strong buyer demand and a lack of housing stock.
However, it’s anticipated that the number of sellers will increase as we hopefully enter a more stable economic climate. If more stock does become available, this will have the effect of evening out the market to its more usual levels of activity.
Currently, Zoopla estimates that approximately 1.2 million homes will change hands in 2022, compared to around 1.5 million this year. In tandem with this, house prices could rise by 3%.
But there are many factors that could impact on those predictions. In particular, new concerns over Covid-19 variants may generate hesitancy among homeowners who were set to enter the housing market this year.
Even if the year does get off to a shaky start, mortgage rates are still low, and there’s significant potential for price growth in locations with currently affordable housing markets.
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