Now that we are at the end of first month of the new year, property market statistics for 2021 have largely been finalised. This makes it the ideal moment to take stock of last year and look forward to 2022.
The most recent Zoopla HPI, published on 27 January, records an annual growth rate of 7.4% for the UK housing market for 2021. According to their figures, the value of the average UK property at the end of 2021 stood at £242,000, a rise of £17,000 over the year. The Nationwide calculate that the average UK home in December was worth slightly more at £254,000, with prices having grown by over 10.4% over the year.
Both Zoopla and Nationwide agree that the property market in London had the weakest performance of all UK regions in 2021. Zoopla report an average rise of 2.4% in property prices across all London boroughs, with only a few seeing growth of over 4%. Nationwide, however, calculate average growth in the capital last year was a much higher 4.2%. Despite this higher figure, they note that London was the only area in the UK to experience lower price growth in 2021 than in 2020.
The Nationwide contrasts this sluggish rate of growth in London with that in the Outer South East, an area covering cities such as Brighton, Oxford and Southampton. This region experienced growth of 11.3% in 2021, making it the second-best performing region after the South West, which saw a marginally higher annual rise of 11.5% over the year.
Affordability is a growing issue in London and the South East. The Nationwide affordability index shows that, whereas ten years ago typical buyers in these areas had to be in the 60th income percentile, in 2021 they had to be in the 80th. Buyers are therefore increasingly being completely priced out of the market or having to borrow every growing multiples of their income in order to buy a home.
Turning to the rental market, whilst rents increased in 2021 across the rest of the country, the ONS figures show that London rents actually fell by 0.1% in the year to December. The ONS comment that the stagnation in rents in the capital can be attributed to a combination of a decrease in demand due to remote working and an increase in the supply of rental property as landlords moved from short to long term letting in the face of dwindling demand from the tourist market.
So, what about predictions for the UK housing market in the coming year? The forecasts for the London market vary considerably according to market sector. The Prime Central London market is expected to perform very strongly, with Savills anticipating growth of at least 8% now that overseas investors are returning after the resumption of international travel. However, their forecast for growth in Prime Outer London at 4% is just half the rate for PCL.
Looking at the more general London housing market, both Savills and Zoopla predict growth of 2% for 2022. Although this compares with predicted growth of between 3% and 3.5% for the UK market as a whole, it’s clear that the attractiveness of London as a place to live and work is rebounding as the economy continues to return to normal.
As a consequence, it is predicted that London rents will grow by between 3.5% and 5.5% in 2022. With the average London rent already standing at £3,400 month, this represents substantial growth in income.
Savills remain confident that London will remain a magnet for property investment in the coming year. Ongoing regeneration projects and the development of the transport infrastructure, especially Crossrail, means that new areas are continuing to open up for the investor.
The BuyAssociation, however, notes that increasing numbers of property investors are starting to look at property outside the capital in order to get the best return on their investment. Cities such as Manchester, Birmingham, Liverpool and Leeds are seeing rental demand grow as companies relocate from the capital to areas that offer a lower cost of living but are still vibrant and popular with students and young professionals.
“It is predicted that London rents will grow by between 3.5% and 5.5% in 2022. With the average London rent already standing at £3,400 month, this represents substantial growth in income.”