Housing Watch: demand explodes


We entered 2021 with high hopes for a much better year than 2020. After another 12 turbulent months, however, we welcomed 2022 with cautious optimism, particularly in the housing market, which has seen unprecedented activity due to of the pandemic.

A relatively slow January with a return to pre-Covid transaction levels was fleeting. February saw the biggest month-on-month price increase as the latest restrictions ended and workers returned to the office, driving buying and selling across the country.

The appetite for city life, especially in London, is returning

Although we are not out of the woods yet, the tiptoeing back to normal is accelerating and trends are already emerging that will shape the housing market this quarter, if not the entire year.

Cost of living crisis

Despite signs that the UK is entering a ‘new normal’, the Covid hangover persists in the form of the cost of living crisis, which is outpacing wage growth at breakneck speed, which means that affordability is at an all-time low.

The conflict between Russia and Ukraine is expected to exacerbate this with rising oil, gas and food prices, and a possible increase in the Bank of England’s base rate in response. This will particularly affect first-time buyers (FTBs), who will be forced to find larger deposits and submit to increasingly stringent affordability assessments by lenders.

Easing of travel restrictions has freed up pent-up international demand

Although the number of people who became FTB in 2021 was 409,370 – up 35% from 2020 – according to the Halifax, it seems unlikely that 2022 will see the same trend unless help is provided. to those looking to climb the ladder because the goal posts once again come in the form of rising costs and inflation.

Fortunately, a host of innovative lenders and intermediaries that specifically cater to FTBs have emerged, such as Generation Home and Home Me, but it remains to be seen how the government plans to replace the purchase assistance program after 2023.

The exacerbated supply and demand problem could see construction to let take off in the UK

Homebuilders Barratt, Persimmon and Taylor Wimpey all reported strong activity on the sales and development fronts, and the healthy forward sales trend shows no signs of waning. The continued success of developers appears to be due to the costs of house price inflation fully offsetting rising material and labor costs, and the continuing imbalance between supply and demand. .

One of the drivers of new construction activity is the dramatic increase in tenant demand, with Zoopla already seeing that demand from prospective tenants for 2022 is 58% higher than in 2021. rental in London had fallen by 71% in 12 months.

Build to rent

This exacerbated supply and demand problem could lead to a take-off in build-to-let in the UK, with a 23% increase in the number of built-to-let properties completed in 2020 compared to the previous year.

Data from the National House Building Council shows that in 2021 listings for new apartments fell 15% year-on-year – with those in London falling significantly further, by 27%. On the other hand, registrations of new single-family homes have reached their highest level since 2003, indicating that people want larger homes and gardens to facilitate a remote working lifestyle.

Many FTBs have been spurred into action by rising house prices and the cost of living

The reluctance to invest in apartments was driven by a perceived lack of indoor and outdoor space, the remoteness from city centers and persistent problems with building cladding and security. But early figures this year suggest that is about to change.

Many FTBs have been spurred into action by rising house prices and the cost of living, which doesn’t look set to come down any time soon. Meanwhile, the appetite for city life, particularly in London, is returning after falling out of favor due to the ‘space race’ at the epicenter of the pandemic.

February saw the biggest monthly price jump on record

The easing of travel restrictions has also helped to release pent-up international demand from those wishing to invest or live in London properties.

Mobeen Akram is National New Homes Account Manager at Mortgage Advice Bureau

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