Guest Blog: Will the Same Key Theme Dominate the Sector in 2022?

By Paresh Raja, CEO, Market Financial Solutions

This year, Market Financial Solutions (MFS) celebrated its 15th birthday. And certainly, since our launch in 2006, we’ve not experienced a year quite like the one that is drawing to a close.

It has been a frenetic 12 months. The sharp rise in house prices has been well-documented, though we must be careful not to attribute this purely to the stamp duty holiday, but also to several other contributing factors – the relatively cheap cost of borrowing, changing demands of homeowners, and chronic under supply of housing all stand out.

Inevitably, the question that springs to mind as we prepare for the New Year is whether 2022 will be markedly different from the year just ending, or should we expect to see more of the same?

House price growth to slow, but not reverse

We should not expect house prices to continue growing at the same pace as seen in 2021. The latest ONS data revealed that average UK house prices increased by 10.2% over the year to October 2021 – this was already slightly down from the annual rate of 12.3% in September 2021.

It would be safe to predict healthy, but more sustainable upticks in prices next year. For context, Savills has forecast house price growth of 3.5% in 2022. Zoopla has suggested a rate of 3%, while Rightmove says 5%.

A key factor in the shallower growth curve is, experts predict, an influx of new properties being listed for sale. Rightmove is suggesting that many existing homeowners will consider moving in 2022, leading to more sales listings, and more choice for buyers and investors, helping to balance supply and demand somewhat.

Housing Crisis to remain critical issue

However, while we can probably expect more listings, the acute housing shortage across the UK will not be resolved in a hurry. It is a major issue, and it will certainly remain in the spotlight in 2022.

MFS recently commissioned an independent survey of 2,000 UK adults. One in five (21%) said they are living in a poor-quality house or flat due to the lack of available alternatives, while a quarter (24%) are living in a different part of their town, city, or region to where they would ideally live due to a shortage of housing in their preferred location.

Our research showed there is a lack of confidence in the UK Government. Just one in six (16%) UK adults believe the current Government will hit its target of delivering 300,000 new homes every year for the rest of this parliament. Less than a fifth (18%) think the Government is truly invested in resolving the housing shortage.

Evidently, Boris Johnson et al will have to take significant strides to restore confidence in the Government’s ability to dramatically improve the housing stock.

Interest rates to rise

Another safe prediction we can make is that interest rates will rise. Inflation is expected to jump from 4% to 5% by next spring, while data suggests that employment rates remain healthy even since the end of the furlough scheme. This will likely force the Bank of England’s hand – many are forecasting multiple interest rates hikes in the next year.

If interest rates rise, the cost of borrowing will increase. For property buyers, this raises questions around the suitability of different financial products, and how to find the best possible solution for their acquisition.

This will be a key trend for 2022 and one that homeowners, buyers and investors must monitor closely.

Demand for bridging loans

As interest rates change and investors consider their options, we should expect increased interest in the alternative finance sector, particularly bridging loans. Indeed, the bridging industry has been a hive of activity throughout the pandemic; a recent survey of brokers found that 51% had seen a rise in demand for bridging finance from their clients during the pandemic, compared to a mere 3% who saw a decrease.

Speed and flexibility have been important factors. Property buyers, especially investors, have often required specialist solutions to help them overcome issues like broken chains, another lender pulling out, or a complex set of circumstances behind their acquisition. Certainly, MFS has enjoyed one of the most successful periods in its 15-year history during the pandemic, with the volume of enquiries received and loans completed both reaching record highs.

The sudden emergence of the Omicron variant has underlined how difficult and – in truth – foolish it can be to look too far ahead. No doubt, Covid-19 will dominate all parts of our life throughout 2022, and we cannot begin to talk about ‘post-pandemic’ plans just yet. However, given the performance of the property market throughout 2021, we ought to have confidence in the resolute nature of bricks and mortar investments, and this should give us optimism as we enter the New Year.