Michael Day's Market Update

I look forward to 2022 and a year of less extremes and steadier markets going forward.

The press are, as always at this time of year, full of predictions for the property market and the main property portals are no exception to raising their heads above the speculative parapet.

Rightmove predict an overall increase in house prices across the UK of around 5%.

Zoopla make a prediction of a 3% increase. This follows their view that there was a 7.1% increase in UK house prices in 2021.

Boomin are more circumspect but still suggest a small increase in property values but rightly make the point that the overall UK position is made up of lots of individual markets across the country, all of which have their own factors and operate at “different speeds”

OnTheMarket has made no public prediction but their most recent “sentiment” index (November) showed sellers and buyers remained very confident of selling or buying over the coming months.

UK house prices rose strongly throughout this year, increasing by 5.6% in the first six months and driven by elevated levels of demand. It is expected that in 2021, the UK will have seen prices rise by a total of 9.0%. Mortgage lender Halifax have announced an overall 8% increase and the Nationwide 10%. Rates of increase were however variable by region with London generally seeing the lowest rates of increase across the UK.

Savills believe that while transactions and thus price growth will continue into 2022, it’ll be tempered by the exceptional growth we’ve seen this year – especially if interest rates start to rise sooner than expected. They predict a 3-5% increase overall.

This will lead to a ‘soft landing’ rather than a dramatic price correction over a short period of time.

The RICS predicts that house prices could end next year 3-5% higher than at the start of the year stating: “2021 has been an exceptionally active year for the housing market, with transactions close to record levels. However, despite more homeowners seeking more space and various incentive programmes … transaction activity for the coming 12 months will inevitably slow.”

“All else being equal, higher borrowing costs will dampen demand across the market to a certain extent. The major challenge will be around the lack of stock on the market with inventory back close to historic lows, and shows little sign of easing.”

The Halifax expects price growth to slow considerably as a result of rising living costs. It forecast price growth of zero to 2% in 2022.

There is no doubt that demand from buyers for UK property continues to rise while supply has, since the end of the stamp duty holiday, hit an all-time low.

Sales agreed year-on-year rose by over 30% across the UK, while exchanges also increased by 55% – a clear signpost of how quickly demand is outstripping supply.

According to TwentyCi, estate agent listings have now decreased by 50% to normal levels, while 530 UK districts have housing stock levels below two-month targets.

Recent reports on 2021 have shown that renting was officially cheaper than buying in terms of monthly payments and the rental market continued to grow from strength to strength.

JLL expect that rental prices will grow by 9.5% by 2025, as the UK market continues to grow alongside increased demand.

This is following on from exceptional price rises in a number of UK regions, particularly the East Midlands, which saw 8% over the last year – the leading growth in the country.

With the UK economy faring better than expected in terms of unemployment and GDP growth, the UK property market forecast suggests that this rental growth is sustainable going forward.

It is easy to interpret data and trends to form an opinion that suits. After all,  they say that there are lies, damned lies and statistics but the simple truth is that demand will continue to outstrip supply which will keep prices steady or rising.

Economic recovery and confidence around coronavirus and employment will be key, as are interest rates. It looks likely that, despite some bumps in the road in terms of coronavirus, economic recovery will remain reasonably strong with employment levels likewise. Interest rates look set to rise but increases are likely to be small and spread out so as not to halt recovery.

My prognosis is simple, if an individual wants or needs to move and can do so, then they should. Property values will largely hold or grow in line with inflation and, certainly in the owner occupier market, most people stay in a property for many years and so, over the lifetime of ownership, there will be periods where values rise or possibly fall and interest rates go up or down. History however shows that over any reasonable period of time, values have grown and this looks likely to continue. The same is true of the rental market where rental values tend to move in line with demand.

Portal Wars

One of the interesting “battlegrounds” in 2022 will be between the portals with both Rightmove and Zoopla announcing significant price increases for their agent subscribers.

OnTheMarket has been moving all of its “free subscription” packages onto fee paying contracts and has increased its ARPB (Average revenue per branch) as a result but this remains significantly behind both Rightmove and Zoopla’s numbers.

OnTheMarket has also just rebranded and relaunched its web presence which includes “tools” aimed at helping agents secure and transact more business. Their investment in Glanty (teclet) will come further to the fore in 2022 with attractive software packages being offered to member agents as part of their membership benefits.

The unknown player in the portal war remains Boomin who have invested hugely in marketing and in attempting to woe agents to their offering. However, as we enter 2022 they appear to have less than 8000 agency offices using their platform – significantly below the other three players. This results in less inventory and clearly hinders customer attraction and retention. Ultimately, consumer visitor traffic who want access to the entire marketplace, will vote with their eyeballs, hence Rightmove’s still dominant position (it has the largest inventory) despite a relative lack of innovation in their offering.

Boomin also have the “cliff edge” looming of the end of their “free year” offering and it will be interesting to see what happens when agents, in theory, have to start paying.

A recent anecdotal poll (albeit an admittedly small sample) on Twitter suggested that only 13% of agents would continue using Boomin if they had to pay for the privilege. The same survey showed that when OnTheMarket made the same move, 31% stayed and paid. An poll earlier in the year had indicated that 84% of agents would only advertise on a paid for basis on one (23%) or two (61%) basis. This would suggest that both OnTheMarket and Boomin will still need to convince users of Rightmove and Zoopla to move if they are to break through significantly.  

I expect Boomin to “fudge” the "paying for" position as it arises. They have always said that agents will not have to pay more in subscriptions than they generate in income from ancillary product sales, on which there has been no information published to date. I expect some frantic refinancing and investment discussions to be taking place.

As always, the property market remains an interesting arena through which the water, choppy or otherwise, ebbs and flows.

I look forward continuing to help my clients navigate their way successfully.