100,000 more house sales forecast in 2022 despite cost of living pressures

A stronger than expected desire for households to move means that overall, housing sales are expected to reach 1.3m - 100,000 more than was originally forecast at the beginning of the year, according to the latest analysis from Zoopla.

Related topics:  Finance News
Rozi Jones
2nd August 2022
House sale sold
"The ongoing impact of the pandemic continues to support a desire to move amongst home buyers."

This also means the pace of house price growth is slowing less quickly than expected and by the end of the year, prices are expected to have risen 5% meaning the average value of a home will reach nearly £260,000 by December.

However, while the housing market currently remains resilient and is performing better than anticipated, Zoopla believes the knock on effect will start to ripple through to the property market towards the end of 2022 and into 2023.

Its predictions show that levels of housing market growth will return in line with the five-year average by the end of the year and will move lower in 2023. But fears of a ‘market crash’ and double digit price falls are unwarranted as Zoopla’s insights suggest there is no sign of a significant drop off in buyer interest in response to higher mortgage rates and cost of living pressures.

Demand for homes has slowed over 2022 but remains 25% above average over the last five years and on a par with this time last year.

Nearly 2.5 years on, post-pandemic ripples are still being felt as a rapid increase in working from home reported by the ONS*, supports a continued desire to move home. A recent consumer survey by Zoopla found a strong link between expectations of working from home and strength of desire to move. Those working from home more are 5x more likely to move than those who don’t see any changes in their working patterns.

In addition, up to half a million older people have left the labour market over the pandemic with retirement a major trigger for moving home. In some instances, the cost of living pressures may be boosting the desire to relocate to save on running costs and find better value for money, in turn supporting levels of demand and market activity.

These factors explain why demand for homes has been more resilient than might be expected given the uncertain outlook for the economy and rising mortgage rates.

According to Zoopla, the demand for homes is expected to weaken further into next year as mortgage rates increase with growth rates predicted to level out at 5% at the end of 2022, however, significant price falls are not expected.

London remains the UK’s most unaffordable housing market where house prices are 11.6x average earnings and prices are rising at the slowest rate of 4%. Zoopla’s data shows demand for homes is weakest in markets that have been experiencing some of the highest price increases in areas like the South West and Wales, while demand remains strong in more affordable markets and cities outside the South East.

Richard Donnell, executive director of research at Zoopla, said: "The ongoing impact of the pandemic continues to support a desire to move amongst home buyers. This is a big reason why the market is not slowing as fast as some might expect and demand remains for sensibly priced homes, especially in more affordable areas.

“The housing market is not immune from higher mortgage rates which we are starting to see increase quickly. Buyer interest is expected to slow over the coming months as people tighten their belts and spend with more caution which will see price growth weaken further. Whilst we don’t expect current trends to lead to a marked drop in house prices next year, buyers will become more wary and it is important sellers are realistic when pricing their homes to sell.”

Richard Davies, MD of Chestertons, commented: “To date, 2022’s housing market has been extremely active. The number of buyer enquiries in the first half of this year has doubled compared to the first half of 2019; before the pandemic. Although we would normally expect the market to slow down towards the summer, we are seeing a continuous uplift in buyer registrations. This suggests that, despite economic challenges and the changes to mortgage rules, buyer appetite remains on an upwards trend.

“One driving factor behind house hunters wanting to move sooner rather than later are interest rates. With the Bank of England putting up rates more than once this year, many buyers have established a stronger sense of urgency. Another reason that drives buyer enquiries is that the market is seeing a post-pandemic reshuffle. After many house hunters put their search on hold or changed priorities over the past two years, we have since been registering enquiries from families wanting to finally make their move a reality as well as international students, international buyers and office workers who require a pied-à-terre closer to work again.”

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