Property News - April 2022 | Property Investment Blog

Property News – April 2022

So we have now finished the first quarter of 2022 and what have we seen?

After a booming 2021 with house prices hitting record highs, everyone is asking and talking about the next downturn and when house prices are going to fall but are they?

Well, the first 3 months of the year have seen the complete opposite to that, prices are continuing to rise and have done so at the fastest rate since pre-pandemic levels with the average house price up a whopping 11% YOY which equates to £43,577 on the average home.

However, the big question is, will that continue throughout the year? Let’s have a look at a couple of the factors that could affect the market.

Cost of Living Increases

Well as we all know, the cost of living has increased dramatically with soaring energy prices, rising food bills, etc, everyone is feeling the effects.

With these costs increasing, naturally, it is taking money out of people’s pockets and will put a strain on people’s affordability.

Now, although these costs are increasing if we look at the effects this really has there are a few key points.

The main and ideal demographic of renters is your young working professional who lives in the city centre and are in well-paid jobs with little outlay. This demographic naturally has more disposable income and can in turn afford the price hikes; it just means one less meal out. This does however mean that they are likely to continue to rent as opposed to buy at this stage which puts more demand on the rental market, attracting more investors to the market, and pushing up prices.

The other factor is that the people who are struggling to make ends meet typically are not likely to be purchasing a property so therefore it doesn’t have much effect on the market.

 

Blog version of ‘Is the Buy-to-Let Market About to Crash & Burn’

 

Supply of new property

As you can see from the table below, the flow of new supply is up slightly however, if we compare it to the level of demand, we are well behind where we need to be.

The shortage of supply naturally pushes up property prices as more people are competing for the same property and are willing to pay more just to secure their next home.

Our View

Although supply is up slightly YOY we feel that this is not where it needs to be.

The costs of labor and materials have increased dramatically which is putting huge strains on developers, making it harder for them to make a profit. With this being said, there are two options for them.

Developers either sit on the land and don’t build until costs start to fall which then decreases the level of supply, or they try and sell for higher prices to cover the inflated costs, either way, it will cause house prices to increase.

Rents Increasing

Not only have we seen an increase in prices over the past 18 months but over the last 6 months, we have seen a great increase in the rental market, especially in city centre apartments.

This is mainly due to the fact young professionals want to be back in the mix of things, going out with friends and heading back to work. Again all of this added up puts more pressure on the housing market increasing prices.


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