UK house prices hit record high

The average UK house price hit £275,000 in December 2021, £27,000 higher than at the same point a year ago.

In England, average house prices increased over the year to £293,000 (10.7%), in Wales to £205,000 (13.0%), Scotland to £180,000 (11.2%), and in Northern Ireland to £159,000 (10.7%).London continues to be the region with the lowest annual growth at 5.5%, while the still-commutable to the capital regions of the South West, South East and East Midlands posted the highest average growth at over 12%.
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Demand outweighs supply

Commenting on the data, David Hannah, Principal Consultant at property tax advisers, Cornerstone Tax, said: “Last year was certainly a record-breaking one for the UK housing market and the increase in house prices has continued throughout 2022.“The nearly £8,000 increase in average house prices is directly connected to the ever-increasing demand of property from buyers, but an ever-decreasing shortage of supply of available properties on the market.” 

Rental market buoyant

On the relocation front, the inexorable rise in UK property prices is also impacting key rental markets, emphasising the need for local destination service expertise for assignees and their employers. "Landlords have exited the market in a big way,” says Simon Johnston, Chair of the Association for Relocation Professionals (ARP) and CEO of Icon Relocation, which has offices in London, Aberdeen and Singapore. “A huge number of landlords have sold up and because the property market is arguably overheated, they are not reinvesting in further rental properties at the same level for now.“Stock levels for rentals in prime locations are at an all-time low according to our data and analysis,” Simon Johnston continues. “This can make it hard when assignees have certain location criteria, such as proximity to schools and workplaces, in popular areas like Surrey. Assignees are having to react at a speed that has been unthinkable in the past and cast the net wider in their searches.”

2022 off to a strong start

Property experts predict the market will continue to grow into the summer at least. Nicholas Finn, Managing Director of Garrington Property Finders, comments, “This isn’t the beginning of the end of Britain’s pandemic-inspired property boom. On this evidence, it’s more like the end of the beginning.“In ordinary times, such double-digit price inflation would be seen as incredible. But 18 months of relentlessly rising prices have normalised the exceptional.“Early signs from 2022 suggest the New Year is off to a similarly strong start. The RICS reports that new buyer enquiries increased in January, and on the property front line we’re seeing a steady flow of determined buyers coming into the market.”

Changing places

Nicholas Finn further believes that high demand for property and the shift to hybrid working means “the Great Relocation has some way to run yet.”“This may explain the huge popularity of desirable areas that were once deemed too far from London to be commutable, such as Southwest England – which saw average prices rise by a blockbuster 13.6% in 2021.“Yet we are starting to see a reflex action in the big cities as astute buyers detect improving value. London is a case in point – prices rose in the capital by 5.5% across 2021, but much of this increase came in the final months of the year and business is very brisk now, as aspirational buyers take another look at some of the classically popular postcodes.“After a year in which prices soared in many rural areas, some buyers have noticed that London’s best areas – while still expensive by national standards – are becoming relatively better value.” 

London calling

London has particularly seen a big increase in popularity for home buyers. Buyer demand is 16% higher than this time last year as workers are being encouraged to return to the office. The rental market is similarly showing signs of growth. Marco Previero, Director of destination service provider R3Location, which specialises in moving key executives into the UK, says the upward pressure on house prices and the property rental market is coinciding with the post-pandemic bounce-back. “The economy is re-opening in central London and rental prices have gone back to pre-pandemic levels,” says Marco Previero. “A declining level of stock, and inflationary pressures, coupled with seasonally higher demand, are putting further upward pressure on rents.”

A return to a buyers’ market?

Looking ahead to the next 12 months, Marco Previero believes that rents will stabilise and criteria for housing selection may well revert back to pre-Covid habits with a couple of exceptions. “People are keener now to have some outside space and a study or space to work from home.” Dominik Lipnicki, Director of Your Mortgage Decisions, also believes the heat in the housing market is likely to subside by the end of the year. "The housing market saw double digit increases in 2021, including a strong finish to the year. Despite inflation being at a 30-year high, it is likely that we will see further house price rises in 2022, albeit they are likely to be more modest. Demand is strong and supply simply too weak."

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