Against a backdrop of economic uncertainty, how do experts anticipate the UK housing market to fair over the next two years? And what opportunities will it include for property investors?
As we settle into the second half of 2022, a new analysis from Hamptons examines how the UK housing market has performed and where the experts expect it to go from here.
Considering the continuously increasing theme of economic uncertainty we’ve faced this year, Hamptons predicts around 1.25 million purchase transactions for 2022, 9% more than during pre-pandemic 2019.
While this activity level is likely to slow over 2023 to c1.1 million due to the rising cost of living and mortgage interest rates, they anticipate activity will pick back up again in 2024. Their report reasons this is due to households delaying moving while inflation and interest rates peak over 2023, and things come off the boil during 2024. A minor hiccup in the grand scheme of the housing market, 2025 looks likely to exceed pre-covid normality with c1.3 million purchase transactions, helped by a growing number of UK households.
How will this impact house prices? According to the research, the average house price in the UK will be 5% higher at year-end than in December 2021, outperforming expectations by 1.5%. While this is still far below 2021’s lofty 9.2% increase, it’s important to remember that the stamp duty holiday had a significant role in inflating the market. Interestingly, Hamptons appear less confident than Knight Frank, which recently increased its annual growth predictions from 5% to 8% for 2022. Regardless, the housing market remains solid despite all the uncertainty.
With a slowing in transactions, house price growth will inevitably follow suit. The Hamptons report predicts that 2023 will be pretty stagnant, with the average house price changing very little from the end of 2022 throughout 2023.
However, growth should pick up again in 2024, to around 2% by year-end. This growth increases again throughout 2025 to 3%.
Head of Research at Hamptons, Aneisha Beveridge, commented that “longer-term, we expect the market to return to its traditional cycle. Price growth will begin to recover in 2024, with London leading the way as a new cycle dawns in 2025. However, stretched affordability will mean we’re likely to see considerably less price growth than in the past.”
Opportunities for Property Investors
Rental demand is likely to increase, especially as rising living costs and interest rates delay first-time buyers in particular. We also anticipate tenants staying in their rental properties for longer to avoid significant rent price jumps and continue saving for their own purchases. The knock-on? Reduced void periods for landlords.
The latter half of 2022 and 2023 pose a good purchase opportunity for property investors. As buyer demand and property prices cool before increasing again in 2024, investors should take the opportunity to secure new investments, with the confidence of strong tenant demand and continued capital growth.
16th September 2022