Much has been spoken about the potential impact of the economic headwind; we have seen the first quarter of 2022 show the property market continue to be brisk as the imbalance of supply and demand continued to underpin market activity. Buyer enquiries are up 31% compared to the last ‘normal’ market in 2019. We found ourselves in a market where mortgage approvals and sales are up, but there were half as many properties available to buy and according to Rightmove, stock levels are down 55%. This prolonged mismatch between demand and supply continued to push housing prices up.
On average properties in the UK are selling subject to contract in just 31 days, the quickest time ever recorded. “Looking at Cambridgeshire specifically, properties are taking on average around 24 days to sell, which is below the national average. Competition for properties is fierce, which means homes are selling quickly and often for over asking price. In fact, Rightmove reports show that asking prices hit their third consecutive record high in as many months.
According to HMRC, over 433,000 homes in the UK changed hands in the first four months of 2022, making it the third busiest start to a year since 2007. Last year was an exceptional year due to Covid-19 and 2016 saw a surge prior to the introduction of the 3% additional homes surcharge. Except for last year, April 2022 has been the busiest since 2007.
While demand is high, and the market is brisk, economic headwinds are mounting and this will filter through to the property market. “Expectations of global and UK economic growth have been pared back, while consumer confidence has plummeted to its lowest level since records began in 1974. Optimism is weaker than during the global financial crisis, Brexit or Covid-19. The Covid recovery, war in Ukraine and rising energy and food prices, alongside a strong labour market and low unemployment have created a perfect storm. Inflation is pushing a 40-year high. Thanks to fixed-rate mortgages, many households are cushioned from the impact of the latest base rate rise, but day-to-day budgets are increasingly feeling the squeeze. These growing pressures will no doubt have an impact on the market, and it is likely that we will start to see it begin to moderate. Unlike the rapid emergency brake scenario seen during the global financial crisis in 2008, any gear change in the property market is liable to be slow and steady.
Even with the economic pressures, forecasters anticipate that we will continue to see positive house price growth over the course of the year. The average price of a home is now nearly £47,000 more than in March 2020. This compares to a rise of less than £9,000 in the two years previously. Month-on-month price growth continues across nearly all regions of the UK, all the main property price indices indicating the annual rate of price growth remains firmly in positive territory. The average price of a property now equates to over eight times current average annual earnings. With earnings growth failing to keep pace with property price rises and cost of living increases, the relative affordability of property is rising up the agenda.