28 Oct Will Houseprices fall in 2022?

As we walk into the final quarter of what has been a record year for houseprices Ford & Partners look at what will happen to house prices in 2022.

It was dark Saturday standing in an empty pub on the High Street at 9pm on Saturday 20th March 2020. The familiar noises of High Wycombe town centre were drowned out by an eerie silence that enveloped the night. It was this noisy silence that so perfectly made you feel anxiety, worry and concern. Seventeen months later and in a drastically changed marketplace High Wycombe Homeowners face different challenge as we still wrestle to come to terms with the effects of the global pandemic. Thankfully the housing market did not fall off a cliff. Propped up by a mixture of stamp duty relief, pandemic itchy feet and a negative supply chain. High Wycombe has seen an average price increase of 8% in the last year setting a new record average houseprice of £373,552. Has this pushed a ‘cliff edge’ drop into 2022?

Firstly, we need to explain what a ‘cliff edge’ drop means in real terms and how it occurs. Having worked personally through two recessions an economic downturn DOES NOT always have a negative impact on the housing market. For example one of the outcomes of the 2008/2009 recession was to dramatically reduce mortgage interest for the majority of homeowners. Mortgage rates have consistently hovered between 2% and 3% for well over a decade. This meant considerably more disposable income for a large proportion of local homeowners. A ‘Cliff Edge’ drop is different and occurs when homeowners NEED to sell their homes in a difficult marketplace. This may be because of changes in employment, relationships and household changes or more commonly economic pressure. This necessity to move puts a lot of people on the market in a short space of time which has a two-fold effect. On one side it introduces more competition for buyers and buyers can negotiate harder to secure the lowest asking prices available. Secondly it erodes confidence in houseprices for financial institutions and the consumer. Bank Instructed Mortgage Valuations are based on comparable evidence. If a property accepts a lower price to achieve a sale than is typical it sets a precedence for that type of property. Competing properties are then forced to lower their asking prices if they are to achieve a sale. This is not what we are seeing in the local marketplace. In fact, the opposite is true, there is a genuine shortage of high-quality homes in the local area and buyer demand is very strong.

We recently listed a three-bedroom semi-detached house in Totteridge for sale at £385000 and received well over 100 enquiries in the first week of marketing. “Schooling”, ‘Local Amenities’ and ‘Affordability in comparison to North London Markets’ are all cited as popular reasons why people want property in High Wycombe. The town has obviously been popular for its transportation, schooling, and amenities for many years now but one of the legacies of the Pandemic is that people do not need to be as centralised in London for employment. Zoopla’s “The UK House Price Index” September 2021 seems to support this perception on a national scale.

This seems to support the inference that there is a net migration of buyers into High Wycombe and its integral link to house price growth. Locally we benefit from surrounding towns still achieving higher average. Maidenhead for example has an average houseprice of £571,581 in the last twelve months. I am confident that demand for housing in High Wycombe will remain strong over the next twelve months, but what about supply?

Thankfully the internet tells us this information as well. Rightmove informs that in the last twelve months there were 124 less properties available on the market than at the start of the year. 1883 properties have come on the market with 1628 achieving an agreed sale leaving 379 currently available. Again, this correlates with Zoopla’s House Price Index quite well with Zoopla reporting 38% less available stock at this current moment. So, if demand is strong and supply is weak, what is going to hold back houseprice growth in High Wycombe in 2022?

At this very moment in the Retail Price Index (RPI) is currently running at 4.9%. This is the highest rate this legacy measure has been since 2012. Although this measure is not the official measure of Inflation used by the Office of National Statistics, it is widely used as a financial tool. In fact, the government uses this as a means of uprating pensions, statement benefits, tax allowances and index-linked gifts. Commercial companies use this tool for wage bargaining, subscription services.  It is also used in relation to housing rents and maintenance payments. In the real world this means a lot of what you buy and subscribe to next year is going to cost you considerably more. The government official uses the Consumer Price Index for measuring inflation. Yet even though this measure typically runs a percentage point below RPI the Office of National Statistics warns that ‘While our central forecast sees inflation rise to well above the target, there is significant risk that it may rise even higher and turn out to be more persistent”. Inflation is an important measure we use when assessing the marketplace in High Wycombe. The largest impact inflation has however is in relation to housing costs. If Rent increases are dictated by changes in RPI. Home ownership costs rise dramatically after a rise in mortgage interest rates. The Governor of The Bank of England has already told us earlier in the month that he expects interest rates to rise in 2022. The financial markets predict this as early as February. Thankfully most mortgage lenders now stress test applications by as much as 7% percentage points. However there is no getting away from the fact that housing in High Wycombe will cost you more next year.

If you would like to discuss any of the issues raised this week or indeed are planning a move in 2022 please contact the office?