With extensive experience of the real estate industry, Benjamin Thompson Kirk works with clients all over the world, with specialist knowledge of the UK, US and Canadian property markets. This article looks at the UK property market and how, despite the combined economic impact of Brexit and COVID-19, the UK real estate market remains surprisingly buoyant.
In February 2022, The Guardian reported that the UK property market reported its strongest January since 2005, with the average house price rising to £255,556 – representing the sixth consecutive monthly increase and a total annual increase of 11.2%.
Speaking with The Guardian, Nationwide Chief Economist Robert Gardner said that demand for housing had remained robust, with mortgage approvals continuing to run slightly above pre-pandemic levels. This comes in the wake of a surge of activity in the sector throughout 2021 as the result of the Stamp Duty Land Tax holiday, a government incentive that effectively encouraged buyers to bring forward their transactions in order to benefit from a temporary reduction in the rate.
Mr Gardner explained that the total number of property transactions in 2021 was around 25% higher than in 2019 before the pandemic struck, and the highest rate seen since 2007. He indicated that stock of homes on the books of estate agents has remained extremely low, citing this as a contributory factor in terms of continued growth of UK house prices.
According to a report from Consultancy.uk, more than half of all UK real estate companies predicted business growth throughout 2022. Nevertheless, over a third predict that technological trends and other challenges could impact their office portfolios.
With house price growth outpacing wage growth by a considerable margin since the pandemic struck, Nationwide and others predict that the UK housing market is likely to cool in the latter part of 2022. On average, a 10% deposit on a typical first-time buyer property now equates to 56% of total gross annual earnings, representing a record high.
While property affordability has worsened, households across the UK have been hit by startling rises in the cost of living, with consumer price inflation topping 5.4% in December, representing the sharpest annual increase since 1992.
Inflation is predicted to continue to rise in following the lifting of the energy price cap in April 2022, the likely impact being that – in months to come – the Bank of England will be forced to raise interest rates in response.
Jeremy Leaf is an estate agent based in North London, and former Residential Chairman of the Royal Institution of Chartered Surveyors. He points out that the Nationwide survey confirms what he has seen on the ground: a resilient property market with prices rising in response to continuing low stock levels. Looking forward, he indicates that inflation and higher interest rates are likely to take their toll on both the pace of price increases and the number of transactions completed. However, the market currently shows little sign of slowing down anytime soon.
Guy Gittins is the Chief Executive of Chestertons, a London-based estate agent. He anticipates that the London market will remain at high activity levels throughout the first six months of 2022. As he explains, for many people 2022 feels like a new chapter, with house hunters eager to start the new year in a new home.
Following on from an unusually busy December, the London property market continued to see record numbers of house purchases throughout January 2022. Guy Gittins indicates that while homes with outdoor space and spacious properties remain highly sought-after, apartments in central boroughs are making a steady come back. He suggests that this market shift is driven in particular by professionals returning to the office seeking a nearby home, as well as students and international investors.
As the UK emerges from the uncertainty created by the COVID-19 pandemic, the UK’s broader economy is on the road to recovery. A study by Crowe took stock of the UK real estate market, predicting likely industry trends. The report suggests that long-term optimism in the sector is growing. Nevertheless, Crowe suggests that many trends for change that started prior to the pandemic continue to influence the market, with many aspects of real estate portfolios still being disrupted.
Caroline Fleet is UK National Head of Real Estate at Crowe. She suggests that real estate businesses across all sectors have become more flexible, innovative and adaptable. While COVID-19 might have accelerated these changes, in some cases creating constraints such as the rent moratorium, many factors affecting the market today already existed before the pandemic and could continue to impact the sector in a post-pandemic environment.
Consulting with 99 respondents across all levels and business types related to the real estate industry, Crowe found that overall, the outlook for the UK real estate market remains positive. Just 5% of real estate professionals anticipated a decline in business in the coming year, with 55% of respondents reporting that they expected to grow their business.