Vanessa Hale
Director, Research
Despite the current challenges in the market, the sector remains very robust and we are optimistic for 2022 as we expect to see a very competitive market this year. With demand continuing to outstrip supply, the extreme shortage of stock will sustain further house price growth.
The World Bank expects global growth to decelerate in 2022-23. Whilst advanced economies are expected to return to pre-pandemic trends, emerging markets and developing economies are expected to remain markedly below pre-pandemic trends. However, changes to the pandemic could easily alter this outlook. Further risks to global economies include additional supply chain disruptions and a need to resolve high debt after the pandemic. Even when the health concerns of the pandemic are curtailed, the pandemic has the potential to result in persistent social and behavioural impacts, changing attitudes to travel and human interaction.
Government backed initiatives and measures have had a significant impact on the recent trends in the housing market. While these measures having now come to an end, initial signs indicate that demand for housing in the UK still remains strong. Although, if the constrained housing supply is prolonged, and fails to meet this ‘robust’ demand, then it is inevitable that prices will continue to rise.
For the UK, the strength of the 2021 sales market has been maintained, with demand still outstripping supply. Agents expect the buoyancy in the market to continue for 2022. The beginning of 2022 may see a small correction in the market given the end to the stamp duty holiday, but this is not expected to affect prices, to any great extent, for the year overall. The rises in interest rates and inflation rates have the potential to have a small impact in later years, and it is yet to be seen whether the behavioural shifts as a result of the pandemic are to become more permanent in the market. In the lettings market, demand has also remained exceptional high with an extreme shortage of stock as accidental landlords who rented out property that could not be sold two years ago continue to return to the sales market. Coupled with the trend to country living we have seen since the pandemic this has meant rents across the regions increased.
PCL sales index data for Q4 2021 recorded QoQ growth of 0.7%, on par with Q3 2021 (0.7%). YoY growth to Q4 2021 was 1.8%. YoY growth has now been above 1% for three consecutive quarters, after experiencing negative QoQ growth since Q4 2014. However, prices still remain c. 20% down from their 2014 peak.
In Q3 2021, sales transactions for PCL properties were down by 44% QoQ. However, QoQ transactions have since recovered, with 17% QoQ growth to Q4 2021. The increases were driven by the £2m-5m and >£5m price brackets, which saw 11% and 30% QoQ growth, respectively. YoY growth on the other hand was negative to Q4 2021 (-2%), compared to YoY growth of 6% in Q3 2021. Total PCL transactions in Q4 2021 were only 59% of the previous peak in Q4 2013.