Making predictions is never easy. Back in May 2020, the Bank of England warned that house prices could fall by as much as 16% as a result of the coronavirus pandemic. Following this news, homeowners – already navigating their way through an unprecedented situation – braced themselves for even more uncertainty. However, according to the latest figures from the Halifax House Price Index, the housing market is continuing to defy expectations. In fact, despite the impact the pandemic has had on the UK economy, average property prices were up 9.8% in 2021, an increase of over £24,500 – the largest annual cash rise since March 2003. Beyond house prices, there’s also other trends which may shape the market in 2022. For example, it’s clear that issues around affordability will continue to feature. Indeed, throughout the pandemic a combination of rising inflation and historically low interest rates meant that many first-time buyers were forced to save for higher house deposits than they may have bargained for. The good news looking into 2022, though, is that 95% mortgages are once again available to first time buyers. Furthermore, despite higher inflation and an increase in interest rates, average rates on those mortgages hit a record low in 2021 and continues to remain at low levels in January 20214. Rising house prices are a challenge for significant parts of the UK, though, with two thirds (67%) of the public believing that the UK housing market isn’t helping people get access to affordable and quality homes in their area. Moreover, both homeowners (60%) and renters (72%) agree that house prices are the biggest issue facing the market right now and are sceptical that the housing industry will be able to provide reasonably priced, quality homes post-pandemic. It will be difficult to make solid predictions within the context of a pandemic. It is important to remember that whether or not house prices rise or fall this year depends on a number of factors, not least coronavirus and the impact it may continue to have on the economy.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of February 2022 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.