The housing market has exhibited interesting behaviour in the last 18 months, with an unprecedented 10% rise in house prices over 2021. The market has been especially volatile in the aftermath of the coronavirus pandemic, but unexpected trends have led many to wonder when the market is likely to settle.
Why Are Prices High?
A number of factors have contributed to the sharp rise in house prices from the end of 2021 to the first quarter of 2022. One of the main factors was the coronavirus pandemic and with it the stamp duty holiday that spurred a continuation of sales and completions through the worst of 2020. Despite a small drop in sales owing to the end of that holiday, the overall increase in sales as first-time buyers took advantage of the holiday led to robust market growth.
This growth was fortified by an overall trend of increased desire for space, itself spurred by the increase in flexible remote working amongst other factors. As the ‘race for space’ began amongst Millennial households starting families and seeking home working spaces, demand for houses increased sympathetically and considerably. The end result was a housing market of ever-increasing value.
Will the Market Slow Down?
Whether or not the housing market is set to see a softening in its growth is difficult to call. Its growth is unprecedented as it stands, with the aforementioned 10% growth in 2021. Owing to the wider economical situation of the UK, with a dramatic increase in inflation rates, mortgage rates are on the rise. Historically, these rises would result in a fall in house prices – but the opposite has happened so far. The housing market is in uncharted waters, and, though a drop in growth rate may be on the horizon, it is difficult to pinpoint exactly when it will occur.
While the price hike is due to increased demand from households able to pay, a significant portion of prospective first-time buyers are being priced out of the housing ladder. This has meant a rise in demand for rental properties, making current housing market trends a good thing for letting agents and private landlords. The increased focus on rental accommodation is also leading to an improvement in rental offerings, with many buy-to-let new builds offering affordable and comfortable options for those unable to enter the housing market.
A Good Time to Buy?
As for those with the means to purchase a home but wondering if now is the right time; once again, the situation is a difficult one to read from an economical perspective, with market norms broken by recent price action. However, it is also true that now is a harder time than ever for prospective buyers to secure affordable mortgages. If prospective buyers have the time to wait, it is possible that inflation rates will slow and wages will catch up – but the overriding sentiment seems to be that times will be tough for some time. With this in mind, short of a drop in market prices, now may be the best time to begin the house-hunting process.