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2022 Property Market Review

December 26, 2022

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Article Summary

Where to Invest
  • The overwhelming Supply vs Demand issue continued throughout the country as in January, the number of homes available for sale per estate agency branch hit another record low of 12 properties.

  • Following the pandemic, short-term lets have become a more popular option for landlords as people and families alike look for more sustainable, convenient options while holidaying or commuting.

  • At the time of writing, you can find mortgage rates lower than 4% for a two-year fix, emphasising that even if there is a spike in the UK market, it always stabilises in the end.

2022 was a year that had several ups and downs for the property market, with instabilities in the economy caused by the multiple changes in government seeming to unsettle investors. It is a year that will be remembered as the year when COVID ended, but fear of the after-effects from the pandemic also seemed to hold back cautious investors. Here, we are going to take a look back at the year and dive into what effected the property market, quarter by quarter.

Q1

The year kicked off with rising house prices, spiking up from the average it was at in 2021. Each month in the quarter broke the record for having the highest average house prices, rising from £341,019 to £354,564, as prices broke the £350k barrier for the first time.

Following the start of the Russia-Ukraine war, the British Pound began to lose strength as a lack of supplies and products negatively affected the economy, being a stand-out factor in rising house prices.

The overwhelming Supply vs Demand issue continued throughout the country as in January, the number of homes available for sale per estate agency branch hit another record low of 12 properties, two lower than December 2021. There were also 15% more enquiries from would-be buyers to estate agents than at the same time in 2021.

It highlighted the issue the UK is facing as the high tenancy demand across the country continues to present investment opportunities, as there still are not enough properties to satisfy the population.

The base mortgage rates in this quarter began to rise following its extremely low rates during the coronavirus pandemic. They began to rise in December 2021, continuing to do so month-by-month in this quarter.

Q2

House prices continued to rise, hitting £367,501 by May, another record. These prices only highlight the premium of luxuries in England, as buy-to-let landlords are reaping the benefits of a high demand market. With cities such as Manchester, Leeds and Liverpool experiencing sharp increases in population over the past decade, tenant demand from students to professionals are as high as ever.

Following the pandemic, short-term lets have become a more popular option for landlords as people and families alike look for more sustainable, convenient options while holidaying or commuting as they will be to do things such as cooking their own meals.

Hotels were closed or had capacity restrictions in 2020 and 2021, which led people to booking Air bnbs when going on holidays. This trend has continued to this year as property owners have seen the capital growth potential in short-term lets in comparison to ASTs.

Focusing on Manchester, our forecasts for some of the properties we market were ultimately very close to the eventual valuations. For example, the Albion Place development was forecasted at a nightly cost of £77 and two-beds at £102 for one-beds, with final average costs eventually sitting at £76 and £98, respectively. Despite this slight shortcoming, the forecasted occupancy rates of 80% were trumped by the actual rates of 89% and 85%.

This shows the real story behind all the big scary headlines and numbers, as the market is still fruitful for those willing to invest into it in times of uncertainty.

Q3

August saw the average house prices drop for the first time this year, following the usual trend as house prices tend to drop in August each year. This quarter also saw interest and mortgage rates sky-rocket due to supply constraints caused by the war in Ukraine, which started effecting the economy from the start of 2022.

The British Pound continued its nosedive, eventually hitting its lowest point by the end of Q3, standing at £1 = $1.04. It was looked at as a risk then to invest in UK property, especially from international buyers. However, the reality was that it was the perfect time for overseas investors to look into purchasing property in the UK. With the Pound being as low in value as it was compared to other currencies in the world, it presented the opportunity for people to get the most out of their investment.

The prospect of capital appreciation has presented itself to overseas buyers, as the prices of these properties are sure to go back to their original prices as the economy improves. It could also exceed its value as the market gradually gains its strength.

The Pound currency currently stands at £1 = $1.21, once again showing the stability of the UK market.

Q4

November and December saw average house prices drop by 1.1% and 2.1% respectfully, in trend with what usually happens at this time of the year. It shows a gradual return to normality for the UK property market, as Rightmove forecasts that prices will drop by an overall average of 2% next year due to the rise of a ‘multi-speed hyper-local market’.

Following the Autumn statement, the media and public began to expect a crash in the property market and the economy in general, as many promises were made by ex-chancellor Kwarteng that seemed extremely unsustainable.

Mortgage rates suffered greatly in this quarter, as increases in rates daunted potential investors, hitting their highest point on 20th October at 6.65% for a two-year fix. Rates did not stay high for long though, as by the beginning of November, they began to drop back down again. At the time of writing, you can find mortgage rates lower than 4% for a two-year fix, emphasising that even if there is a spike in the UK market, it always stabilises in the end.

Despite this along with the other ‘obstacles’, we at NPG recorded a record breaking month in October in terms of sales made. It is the prime example of not always taking what the public says as fact, as during this same time due to out hard negotiations on some of our projects, we were getting prices 20% below market value for some units.

Conclusion

What we can take away from this year is don’t believe all the big headlines in the news, do your own research and call your property consultant to find out what the deals actually are in the property market.

If you are aiming to invest, usually this would be for the long-term, so small occurrences like rises in rates and dips in currency strength should not be as big of an issue as it was made out to be, as a consistent high tenancy rate in the UK is sure to garner high capital gains.  

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The Bailey

From £249,950

Yield: 13.5%
   In Construction
   Est. Q4 2024
   Lease Length: 250 Years

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