In many ways, the property sector has experienced 2021 as a game of two halves. On the one hand, supply issues hampered the building of new properties in what was, according to the Chartered Institute of Procurement and Supply (Cips), the fastest growth in building supply costs since the 1990s.
Cips group director Duncan Brock put these difficulties down to a potent mix of Brexit-related delays, broader hold-ups in the world of shipping, and the ever-present Covid restrictions that have continued to play their part in generating uncertainty over the past year.
On the other hand, these same Covid restrictions have – perhaps counter-intuitively – spurred on a remarkable and much-reported growth in property value over the past twelve months.
Between the stamp duty holiday that wrapped up this summer and a general urge to move away from cities, we’ve seen the average price increase by 9.8 per cent in the first eight months of the year alone (according to data from the Office for National Statistics).
It’s important to bear in mind the patterns and ongoing effects of 2021 when thinking about the coming year – while, of course, trying to account for the unpredictability of the pandemic.
Development and construction challenges
If recent months are anything to go by, 2022 might prove rocky for the property sector on the construction and development side of the equation, with a variety of impediments standing between developers and the houses that are currently in huge demand.
The House Builders Association has named a number of interrelated issues at play here, with materials not only facing shortages, but substantial rises in price and delays on delivery too.
This is a complex issue, and one which could be with us for a while: as the Confederation of British Industry has suggested, the next two years may come hand-in-hand with shortages that have an impact on the property sector.
However, though challenges will undoubtedly remain as we bring in the new year, it’s worth noting that supply chain issues and pricing don’t need to be seen as inevitable or permanent.
Even in November, the HIS Markit/Cips UK Constructions Purchasing Managers’ Index rose to 55.5, meaning that most businesses in the world of construction had expanded their activities when compared with the month before.
This can probably be attributed to an easing of delivery times: while June saw 77% of businesses complaining of longer supplier delivery times, only 47% said the same by November – a substantial drop.
As such, it’s clear that the problems of the past year don’t necessarily need to be repeated in the year to come – as implied by economist Samuel Tombs, who says that while construction output was still 1% shy of pre-pandemic levels in September, we might see that final percentage point reached by mid-2022.
Other causes for optimism in 2022 become quickly apparent when we turn our attention towards property values and price rises.
This year’s house prices have – as mentioned above – been a remarkable area for growth, with huge demand and scarce supply putting property investors and developers in a very favourable position, even when factors like the stamp duty holiday melted away.
As such, there’s no reason to think that this trend towards buying spacious properties away from cities is necessarily going to end any time soon.
In fact, although there’s been a lot of uncertainty surrounding the new Omicron variant, we can say with reasonable confidence that homebuyers and property investors will have a continued reason to fuel growth in areas outside London, with Savills predicting a lessening of the north-south divide in house prices over the next five years as a result of continued interest in bigger, less urban properties.
Of course, as the pandemic continues to develop in 2022, we may see new patterns emerging – if home working gives way to a more balanced split between home and office, value may be attributed to different kinds of property.
Just recently, in early December, Halifax data suggested a surprising growth in the price of flats, which are now outpacing detached houses in a reversal of last year – perhaps pointing to the dominance of hybrid working patterns in which small-scale city accommodation or second homes look more appealing.
On the other hand, Omicron may throw a spanner into those works altogether, returning us to another hotly contested lap in the ongoing ‘race for space.’
Whichever direction the pandemic takes us, the property sector remains buoyed up by a remarkable ratio of supply and demand, with estate agents Jackson-Stops finding that there are currently 19 buyers per newly listed property – and Rightmove predicting a 5 per cent rise in property values next year.
As such, perhaps the one firm prediction we can make for 2022 is that the property sector – and those investing in it – will contain plenty of opportunities for those ready to roll with the punches of another unusual year.
*Reece Mennie is CEO of HJ Collection