Following September 2021, the UK property market had been experiencing a surge in demand and prices following the end of the country's COVID-19 lockdowns. This trend has continued into 2022, as buyers continue to seek out larger homes with outdoor space, as well as more suburban and rural locations.
Why have house prices risen?
According to data from the Office for National Statistics[i], UK house prices increased by 8.7% in the year to June 2022, marking the highest annual growth rate since 2014. The demand for properties has been driven by a number of factors, including continued low interest rates, the temporary stamp duty holiday, and changing buyer preferences in the wake of the pandemic.
However, the market has also faced challenges, including ongoing supply shortages of available properties and rising construction costs due to a shortage of materials and labour. This has led to a slowdown in new construction, particularly in the affordable housing sector, and has contributed to rising prices for existing properties.
There are also concerns about the impact of the pandemic on the market in the long term. The end of government support measures, such as the furlough scheme and the stamp duty[ii] holiday, could lead to an increase in unemployment and a drop in demand for housing. Additionally, the ongoing uncertainty around Brexit and the potential for rising inflation and interest rates could also impact the market in the coming months.
Why has the popularity of Buy-to-Let investing increased?
One notable trend in the UK property market in recent years has been the growing popularity of buy-to-let investments[iii]. According to data from UK Finance, the number of buy-to-let mortgages increased by 6.4% in the first half of 2021, compared to the same period in 2020. This suggests that investors continue to see value in the rental market, particularly in areas with high demand and low supply. However, the buy-to-let sector has also faced challenges, particularly in the form of changing government regulations. In recent years, the government has introduced a range of measures designed to make it harder for landlords to operate in the sector, including increased stamp duty rates and changes to tax relief on mortgage interest payments.
Why are more homes being built?
Another area of the market that has seen significant growth in recent years is the new build sector. According to data from the Ministry of Housing, Communities and Local Government, the number of new homes being built in the UK reached a 30-year high in 2021. This has been driven by a range of government policies and initiatives, including funding for affordable housing and changes to planning regulations. However, as mentioned earlier, rising construction costs and supply chain disruptions have slowed the pace of new construction, particularly in the affordable housing sector. This has led to concerns about the overall affordability of housing in the UK, particularly for first-time buyers and those on lower incomes.
Overall, the UK property market remains in a state of flux, with both opportunities and challenges for buyers, sellers, and investors. As always, it is important to approach any investment in the market with caution and to conduct thorough research and seek professional advice before making any decisions. With careful consideration of all factors, however, it is possible to make smart investments in the UK property market and to take advantage of the opportunities that it presents.
Footnotes:
[i] Office for National Statistics - largest UK independent producer of data figures for bodies and firms such as the government.
[ii] Stamp Duty - a tax you might have to pay if you buy a residential property or a piece of land in England or Northern Ireland over a certain price.
[iii] Buy-to-Let investment - purchase the property and then act as the landlord, letting it out and charging rental payments.
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