Predictions for 2022 – active auctions market, prices to rise, BTR one to watch

We’re already into the second month of 2022, but predictions on what the market could bring for the remainder of the year continue to reach us.

Gary Murphy, consultant and auctioneer at Allsop, said despite the past two years of global turmoil, the UK housing market has remained ‘paradoxically resilient’.

“The statistics defy the colossal impact of the pandemic,” he said. “According to Nationwide, 2021 was the strongest calendar year for house price growth since 2006, up 10.1% compared to 6.4% in 2020. Nor was the success limited to private treaty transactions: Allsop’s residential auctions raised a total of £381 million in 2021, an increase of over 20% on 2020.”

But why has this been the case? Murphy says the strength of the UK housing market in 2021 can in part be attributed to supportive measures such as stamp duty concessions, record low interest rates, government ‘bounce back’ loans and the furlough scheme.

“Other contributory factors include the pent-up demand from lockdowns, a general shortage of supply, and the ‘race for space’ as many buyers abandoned city living in favour of more rural locations offering access to nature and more space for home working,” he added.

So, what does this all mean for property investment in 2022? “We think it’ll be an active year, especially for the residential auction market. The pandemic is set increasingly to be accepted as an unwelcome neighbour whose presence will be tolerated and managed as safely as possible while life goes on,” Murphy claimed.

“Against that inevitability, it seems likely that average house prices will continue to rise – albeit at a more measured pace. London is likely to remain fairly flat or show smaller gains overall as the race for space slows from a sprint to a walk.”

He says that as values across the country begin to stabilise and interest rates creep up, residential investors will chase yield.

“Demand will remain firm but with a keen eye on sensible pricing. Auctions will be the place to look for value for money,” Murphy continued.

He also thinks purpose-built rental housing is one to look out for this year.

“Build to Rent (BTR), which is continuing its rapid expansion within the residential market, will also be one to watch in 2022,” Murphy explained. “The sector is increasingly diversifying its offer, including through increased provision of single-family units, and therefore is leading to new opportunities that offer strong yields when well-managed.”

Murphy argues that the value of development land and renovation opportunities has been impacted by a significant shortage of construction materials over the past year, caused by Brexit and Covid.

The result has been a rise in the price of building works by almost a quarter in the past 12 months according to the government.

“While the industry continues to face uncertainty, and further price rises are expected, the appetite for investment opportunities will no doubt be affected,” he said. “Core and value-add assets will continue to appear across the market – and savvy investors would do well to keep an eye on auctions to find opportunities that could make their year.”

Murphy thinks the private rented sector will continue to flourish in 2022, especially as it increasingly develops through the growing numbers of institutional landlords entering the market and BTR operators.

“The East Midlands and the South West saw the highest annual growth in private rents, at 3.1% according to the Index of Private Housing Rental Prices, and it is likely that rents will continue to see the strongest growth outside of London,” he added.

“They will, however, recover somewhat in London, as demand grows with people flocking back to the capital alongside their ‘return to the office’ with restrictions removed. As such, there continue to be opportunities for investors in buy-to-let properties across the UK.”