The property market has continued to rise throughout 2021 with house prices increasing by 11.8% this year alone.

According to the latest data revealed by real estate company, Zoopla, house prices rose at an annual rate of 6.9% in October, double the rate of 3.5% recorded in the same month last year.

By the end of 2021, 1 in 16 homes will have been sold, making it the busiest property market for 14 years.

Although the house price growth is running at a seven-year high, the 6.9% growth indicates a slight setback from the above 7% growth recorded in August and September. Furthermore, quarterly figures show that the overall pace of growth is down from 2.8% in July to 1.2% in October.

Zoopla estimates that there will be 1.5 million property sales this year, totalling the value of homes changing hands at £473bn, up £95bn compared to last year.

So, what has caused this growth in the property market? And can we expect to see the same in 2022?

A lot can be said on the driving forces impacting the growth of the property market, but figures mainly nod towards low mortgage rates, the coronavirus pandemic prompting homeowners to reassess, access to mortgages for first-time buyers and the well-received stamp duty holiday.

The stamp duty holiday finished its final phase at the end of September, making minimal impact on growth following the two months after. The main factors are considered to be around the influence of the coronavirus pandemic on moving decisions.

The re-evaluation of housing needs, i.e., space, locating to more rural spots and facilitating hybrid working following the multiple lockdowns last year are primary factors making up for the end of the duty holiday.

According to Zoopla’s stats, 22% of UK households remain ‘eager’ or ‘very eager’ to move home in the next 18 months as a direct result of the pandemic. What was previously working offices in city centres, are expected to be popular apartment conversions that will drive property sales in urban locations.

Additionally, the increase of house prices has meant an increase in equity for homeowners, with the average value of homes has risen by nearly £50,000 over the last five years. This provides households with momentum to make their next move, whether that decision will be based on size, location, or value.

Then again, there is also the contributing factor of home buyers benefitting from low mortgage rates. These were first introduced in 2015, ranging between 2 and 3% that has been underpinned by an ultra-low base rate set by the Bank of England. Earlier last month the Bank of England agreed to keep these rates unchanged, however, they did suggest that some rate rises may be on the way.

Combining all of these factors, we can expect that house prices will gain 3% by the end of 2022. Although modest in comparison to today’s increase of 6.9%, remains to be seen that strong demand and increase in equity can continue in the year ahead.

Source: Zoopla

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