During the coronavirus pandemic, property prices in the UK have skyrocketed – causing even more misery and frustration for those looking to buy their first home and escape the rental trap.
The surge in house prices during the pandemic has placed homeownership further and further out of reach for millions, with house price growth far outpacing wages for several years.
Now many people are wondering if 2022 will be the year we finally see a correction in the UK property market. But will we?
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Why are UK house prices so high?
There are several reasons why UK property prices are as high as they are. However, the stamp duty holiday from July 2020 to September 2021 has fueled recent growth.
At the start of the pandemic, there were fears that the actual shutdown of the UK economy could shut down the housing market entirely and drive down prices.
But Chancellor Rishi Sunak opted to offer a stamp duty holiday to keep the real estate market buoyant. This goal was achieved and house prices soared thereafter.
As a result, UK house prices rose faster in 2021 than in any calendar year since 2004, according to Halifax – and rose 9.8% for the year as a whole.
According to Halifax, the average UK house price hit £276,091 in December – up from £24,000 over the course of 2021.
Will the UK property market collapse in 2022?
The end of the stamp duty holiday and uncertainty about the outlook for the economy in the coming months have led some to question whether 2022 could see a sharp fall in house prices.
Whilst no one can definitively predict what the coming months will bring, it looks very unlikely – although the housing market is widely expected to cool off compared to last year.
Now that the stamp duty holiday has been withdrawn, buying activity should be a little quieter than the near-frenzy seen in some areas in 2021.
The Bank of England also unexpectedly hiked interest rates in December amid concerns about rising inflation, although the policy rate – now at 0.25% – remains at very low levels.
The central bank could raise interest rates further in the coming months. As a result, borrowing – including mortgages – would become more expensive.
As a result, this could have some calming effect on the UK property market – and potentially help curb house price growth compared to 2021.
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