To this end, leading estate agents and solicitors, MOV8 Real Estate, have put together their predictions for the property market this year, and what they see as the key factors and challenges facing the sector in 2022.
A quick recap of the year gone by
2021 was an exceptional year in the Scottish property market in every sense, with the effects of COVID-19 never far from view and a continuation of the shortage of supply of new properties coming to the market versus demand from buyers. This has put significant upward pressure on prices, with the Scottish market experiencing significant annual property price increases and decreased selling times.
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2021 was also shaped by the end of two significant tax breaks: Land and Buildings Transaction Tax (LBTT) in Scotland and Stamp Duty Land Tax (SDLT) in England. These tax breaks were aimed at stimulating activity in the property market but it turned out that the property market didn’t require much stimulation in the first place. The unprecedented pressure to ‘bring forward’ property transactions to ensure that they ‘beat’ these deadlines put extreme pressure on property lawyers across the UK and left many of them unable to cope.
As the year came to an end, there was the traditional seasonal slowdown of properties coming to the market in winter, however, demand remains high during this period with buyers experiencing less choice and low stock levels. There’s no need to wait till spring to put your property on the market, demand is steady throughout the year and there’s far less competition for your property in winter.
So, as we move forward into 2022, here’s what the experts at MOV8 predict property buyers and sellers can expect in the coming year.
The impact of COVID-19 on the property market
The rapid rise of the Omicron variant is ever-present in the news and will undoubtedly impact upon our daily lives well into 2022, however, will it have a negative impact on the property market?
In March 2020, it was predicted that the original lockdown, mass uncertainty about employment prospects, and the economic damage caused by the pandemic, would harm the property market and that there would be a sharp decline in property transactions and a drop in property prices. This could not have been more wrong!
The experience of the MOV8 team post-lockdown in 2020 was that the demand for property sky-rocketed, particularly for houses and properties with outside space. That picture has remained consistent ever since.
Rightmove’s December House Price Index reported that valuation requests through their website were up 19% compared to this time last year. With a valuation request being the first step to selling a home, this indicates confidence in the market for the beginning of 2022.
Will supply catch up with demand?
The low supply of new properties coming to the second hand market combined with very high demand from buyers was a constant theme throughout 2021 and this is likely to continue into 2022.
The new build property sector forms a significant part of the market but COVID-19 has hit this sector hard, with the supply of building materials and significant staff shortages due to illness meaning that a lower than average number of new build properties were released to the market in 2021, and again, that is likely to continue into 2022.
Confidence in the property market, however, remains strong and the market has withstood one of the most seismic events in living memory in the past couple of years. Restrictions on our ability to spend, including less socialising and holidays, have allowed more people to save towards a house purchase. With house prices rising in 2020 and 2021, existing homeowners have experienced increased equity in their homes, allowing them to jump up the ladder.
Will prices soften in 2022?
There is no reason to predict that the property market will cool in 2022 versus 2021. This might not be the best news for property buyers trying to get a foothold on the ladder, but it’s good news for property sellers.
Zoopla recently predicted an overall increase of 2.5% in Scottish property prices in 2022, while Rightmove forecast a UK-wide increase of 5% in selling prices.
There will always be local variations and areas with highly-rated schools will continue to enjoy strong selling prices, as well as areas that offer more outside space and that are within commutable distances to cities and towns.
Economic factors and the property market in 2022
Inflation and interest rates rising
The latest Office of National Statistics (ONS) report noted that the UK Consumer Prices Index (CPI) rose to 5.1% in the 12 months to November 2021.
Rising inflation makes consumers less well-off and more likely to tighten their belts. This affects people’s ability to save money, including for a deposit for a property purchase.
The Bank of England, in December 2021, also announced an increase in the Bank Rate (often known as the ‘Base Rate’) for the first time in three years. Anybody on a tracker or variable rate mortgage will likely see their monthly mortgage payment increase.
Increased monthly mortgage payments and less-attractive mortgage deals, particularly longer term fixed rates, will deter some buyers. However, given the unprecedentedly-high demand in the Scottish property market, there is a long way to go before this would have a material impact on property prices – the market is so competitive that it can currently afford a slight drop in the number of buyers who can afford to buy.
Overall outlook for the property market in 2022The team at MOV8 are confident that the property market will remain buoyant in 2022.
The fundamentals that underpinned the market in 2021 are unlikely to change dramatically – lack of supply, huge buyer demand, affordable mortgage products, reduced ability to spend money, an increase in working-from-home, the need for outside space and a desire to treat oneself to something nice during a challenging time.
All of these factors combine to create a highly competitive landscape for property buyers and a very healthy market for property owners and sellers.