The big question for the housing market is not how well it performed last year but how it will perform as 2022 rings in the changes. No one expects to see the kind of price growth delivered over the last twelve months but without some major market disruptions, the stage is set for further rises.
Yes, the number of mortgage approvals has fallen considerably over the last few months, yes rate rises are already nibbling away at the amount of debt people can take on and yes many of the people who wanted to move because of perceived changes in family need have done so.
But the crucial element of this formula is demand. New buyer enquiries rose by 13% in November last year, but new listings are heading in the other direction.
Danni Hewson, AJ Bell financial analyst, said: “It doesn’t matter a jot that the stamp duty sweetener is now a distant memory if you want to move or even jump onto the ladder for the first time, you’ll pay whatever it takes to make your dreams come true. A home is an emotional thing and people will stretch themselves particularly whilst money is still relatively cheap, and they can lock in payments for a decent period of time. Housebuilders have hustled to take advantage of the boom, but supply issues and labour shortages have taken their toll and support measures which kept people in work have managed to head off a spate of foreclosures.
“But there’s little doubt that the heat in the housing market will be cooled slightly by rising temperatures elsewhere. The squeeze on budgets will impact people’s ability to save and the temptation to splurge on things like holidays will also suck some of the cash away from those house buying pots. Then there’s the Bank of England, how far and how fast will they push the rate rise button? Will anticipated relaxation of some mortgage regulation balance that out.
“For many buyers a quarter of a million for an average home seems like pie in the sky. There is a fear that some people might find themselves overstretched in years to come, particularly if inflation sticks around for a couple of years. And as regional differences continue to be eroded will there be increased focus on creating more affordable homes or will the first rung of the ladder keep getting harder and harder for some to climb?”