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2022 in review: the British housing market

A look back at the key highlights in 2022 that shaped the housing market.

A look back at the key highlights in 2022 that shaped the housing market.

2022… a year many of us would like to forget but will probably remember more than any other! Coming out of the pandemic, we’ve had to deal with the impact of the Russian/Ukraine conflict driving up global energy costs, supply chain disruptions which have further fuelled the cost-of-living crisis, rising rents, expensive mortgages and an unstable political landscape. Quite frankly, the less we say about, the better!

In this blog we’ll highlight some of the key trends & events in 2022 that have further amplified the already cumbersome structural problems that have existed within the British housing industry.

Bank of England Base Rate

The Bank of England increased the base rate every 8 weeks since mid-December 2021 to fight inflation and it currently sits at 3.5%, the highest we’ve seen since the 2008 financial crisis. The base rate is important as it directly impacts both the accessibility and affordability of mortgages. In 2022, we saw mortgage products peak at 6.25% in 2022 (based on 90% loan-to-value mortgage1) further highlighting just how fragile the financial ecosystem truly is.

The rate rises have made mortgages more expensive and unaffordable for many aspiring homebuyers. Although mortgage rates have reduced slightly over the last two months, the Bank of England has indicated inflation will be the key consideration when deciding whether to increase the rate again next year. As of November 2022, inflation sits at 10.7% and while down from 11.1% in October, recent analysis seen by the Financial Times indicates that Core Inflation (inflation that includes food and energy prices) is still accelerating which may warrant future Base Rate rises.  

However, it’s not all doom and gloom as experts have predicted higher interest rates could lead to less demand in the housing market, and a slight correction of house prices in 2023. This correction has already begun with house prices falling in some parts of the country.

Pressure on Rental Properties

Spareroom, the flat-share portal, reported the largest spike of new renters, roughly 125,0002, at the beginning of the year following the pandemic. Many renters delayed leaving or moving home as the country went through 3 lockdowns and adjusted to flexible working. They have all come back at the same time resulting in a huge amount of pressure on rental properties.

This has led to large supply side issues of rental stock and as a result, rents have begun to rise throughout the UK. The underlying trend as identified by Zoopla & Rightmove indicates that there has been a considerable focus on smaller-sized properties most notably studios and 1-bed properties3

Rents Rising

Zoopla’s quarterly rental market review (Q4) found 7 out of 12regions in the UK saw double digit annual changes in rent with London leading the pack at a staggering 17% average rental uplift. To put this into perspective, that’s an extra £170 per month added to the rent bill, leaving consumers with less to save monthly. Even the region with lowest recorded change, Belfast, saw an increase of 7.6% over the past year.

Why is this happening?

There are two main reasons driving this trend across the UK. First, as we briefly mentioned the chronic problem of supply has been unable to meet growing demand as more renters enter the rental market. Rightmove, in their quarterly tracker for Q3, found demand was up by 20% compared with last year and homes available for rent down by 9%. Supply has already been short, and if rental demand and supply continue to head in opposite directions, we could see further pressure on rental properties in 2023.

Secondly, the added competition for rental accommodation has seen renters agree to higher rents to secure accommodation contributing to higher rents. The added competition has also seen demand rise for studios and 1-bedproperties as more tenants look for the cheapest property as a result of stretched budgets.

End of Help-to-Buy

2022 also saw the end of Help-to-Buy, an equity loan that acted as a budget boost and enabled aspiring homebuyers to get on the ladder with just a 5% deposit. A polarising scheme, Help-to-Buy has often been criticised for not helping enough first-time buyers on lower incomes and contributing to rising house prices as developers charged a premium for newbuild homes. On the other hand, hundreds of thousands have benefitted from the scheme and at its peak, Help-to-Buy has addressed c.50k aspiring owners find a home a year. As such, there is no doubt that this scheme will be missed. (We have examined this in one of our earlier blog posts).  

Were there any positives in 2022 for aspiring buyers?

While the pressure on rental properties and expensive mortgages were a huge blow to anyone looking to buy a home in 2022, the year did provide two positives: house price growth has slowed down during the latter part of the year (and in some markets house prices have declined) and Rent-to-Own has entered the market as it offers a real alternative path to homeownership.

House Prices

According to Halifax’s House Price Index4 (HPI),house prices fell in both October (by -0.4%), and November (by -2.3%) which could be a sign of things to come as mortgage affordability is expected to remain a key issue in 2023. Given mortgage lenders must consider rising living costs as part of their affordability assessments, insiders have mentioned that lenders are expected to cut down on their lending as the economy struggles. The market has already seen the near total withdrawal of 95% mortgages, and we expect further withdrawal of lending products to cause a greater dip in demand which could lead to house prices falling further. For context, Rightmove & Zoopla have already reported asking prices being reduced over the past two months by sellers to reach a sale

It is important to note that Halifax’s HPI recorded an annual change of +4.7% so houses are still more expensive than they were this time last year, as pandemic era regulation implemented to support homebuying buoyed the market. Therefore, the real opportunity will be if house prices continue to slow and fall presenting an attractive entry point for aspiring homeowners who have a deposit saved and could get a mortgage next year.

New Ways to Buy a Home

Although the structural obstacles to homeownership will undoubtedly require policy change at government level, 2022 saw the emergence of Rent-to-Own as an innovative solution to help aspiring homebuyers get on the property ladder. Rent-to-Own bridges the gap between renting and owning by allowing aspiring homebuyers to rent their dream home for a set term and use this time to get mortgage ready, by saving a deposit and improving their credit history.

Leading the pack is Jrny, looking to launch in 2023, who already have hundreds of aspiring homebuyers signed up to their scheme. To find out if Jrny is right for you, and how we can help you lock-in your dream home today visit www.joinjrny.com.


1Bank of England - Quoted household interest rates on 2 year fixed-rate mortgages

2Spareroom - Why the rental market is (currently) screwed

3Rightmove - Rental Price Tracker Q3 2022

4Halifax House Price Index – November 2022

Image by wirestock on Freepik

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