This guest piece was written by Andy Foote, Chairman at Joseph Mews.
The UK property market has been on an upward trajectory for the best part of 10 years. With consistent price increases and competitive rents, will this growth continue in 2022? While the pandemic put downward pressure on the UK economy, so far, property has remained one of the most resilient markets out there.
But as we continue to ‘live with Covid’, Joseph Mews, a leading UK property investment company, discusses what’s in store for the UK property market in the coming months.
Promising forecasts
After two years filled with challenges, 2022 arrived with a wealth of possibilities. With record breaking property prices and competitive rents, the return to a ‘pre-Covid’ economy had the potential to catalyse a sharp market correction for UK property.
However, as Q2 grows closer, the property market continues to go from strength to strength. Following reports of yet another 0.5% price increase in February, the positive forecasts for 2022 are beginning to materialise. Not only is this offering more opportunities for long-term capital growth, it’s also making higher rents more achievable for investors.
According to JLL’s latest reports, UK property prices are on track to increase by 4.5% in 2022 alone, offering a glimpse of what is yet to come. By 2026, property values across the country could increase by up to 19%, further highlighting the resilience of the market as well as its potential as a long-term investment asset.
Not only are UK property prices set to continue on an upward trajectory, but the rental market is also forecasting a similar performance. Average rents are almost reaching as high as £1000 per calendar month, and over the next five years, this market could expand by another 12%. With both short- and long-term returns on the horizon, it’s safe to say the momentum from the last two years is far from over.
Supply and demand
At the root of these promising forecasts is demand. Over the past two years, a flurry of demand has pushed the market to new highs, fuelled by a significant undersupply of property.
While transactions peaked at 1.4 million in 2021, the supply of property reached an all-time low. The UK property market is still experiencing the wider effects of this undersupply, despite the flow of new properties gradually increasing.
In January, the property market reported one of its first increases in supply over the past 12 months at +5%. However, in comparison to its five-year average, the demand for properties increased by 70% in the same period, highlighting the disparities across the market.
Regardless of the apparent increases in supply, the continued demand for property will bolster the wider market in the coming years. As a result, this will continue to push prices on an upward trajectory for the foreseeable future.
Positive economic growth
As we have seen over the past two years, the UK economy usually has minimal impact on the performance of the property market. That said, the health of the economy does tend to influence the decisions of homebuyers and investors.
Generally speaking, if interest rates are low, there is more incentive to spend – or invest – money rather than save it. With historically low interest rates, this is something we’ve seen in recent years. As more homebuyers and investors took the opportunity to make their money go further in property, this only helped to sustain property prices.
The UK economy has officially returned to ‘pre-pandemic’ levels, bringing with it several changes. While we’re currently experiencing rising costs of living and increasing interest rates, economic forecasts for 2022 remain positive. According to JLL, GDP growth will reach as high as 3.5%, further boosting buyer sentiment for the year.
As we continue to live with covid and the return to pre-pandemic life, there are still concerns surrounding a rapid market correction for UK property. That said, the market as a whole continues to go from strength to strength, driven largely by competitive rents and promising price growth. With buyer sentiment still positive, 2022 is set to be yet another bumper year for the UK property market, making it a prime investment opportunity.
About the author
Andy Foote is the Chairman at Joseph Mews – a leading UK property investment company. Combining deep expertise with an unrivalled track record, Joseph Mews is recognised internationally for its property services.