Has the UK Housing Market Bubble Burst?

With 2021 rapidly coming to a close, news of the UK house sales declining by 52% in October, combined with the continued disruption to the global supply chain causing new developments to be delayed has caused some concerns in the UK housing market. However, there are still positive signs, with the continued demand for rural properties continuing, as well as the recent increase of inner-city properties softening the blow. There continues to be an unbalanced supply and demand level in the UK housing market, but is this due to change going into 2022? David Hannah, principal consultant at Cornerstone Tax discusses what’s next for the housing market, the current supply and demand trend and not to panic despite the recent decrease of UK house sales.

I want what you don’t have

With recent news of UK house sales falling by 52% in October (following the end of the SDLT holiday), it will not be a surprise to many, given that many purchasers will have accelerated completion in order to take advantage of the savings that were offered by it.

Whilst conveyancers are rejoicing and gearing up for a quiet run up to Christmas, others in the UK housing market may be concerned by other factors affecting property supply. One of these concerns is the continuing sharp decline in stock both online and in estate agents, whilst it is normal to expect a reduction in the property market during the festive period, the shockingly low stock will still cause massive problems within the UK housing market as the supply may not be big enough for the demand.

The sudden impact of the worldwide supply chain issues has also been a significant factor affecting the UK house market. With severe delays occurring in receiving building materials, it has meant that new build stock and completion of projects have been delayed severely.
Buyers seem unfazed by this however, with many already committing to purchasing new build properties which may not be completed until at least the second quarter of next year- meaning that the available stock for next year will be further reduced, unless the supply chain issues are resolved.

Rural and urban locations continue to be sought after in the UK housing market, with 44% of Brits feeling that the impact of Coronavirus has made living in a city less appealing and a further 24% of Brits seriously considering moving out of the city to a more rural area due to the pandemic, it is predicted that these will continue to be more popular than inner-city properties (despite the recent increased demand of inner city properties) throughout 2022 also. Because of this, a shortage of supply will inevitably mean upward pressure on prices, until balance can be found between supply and demand.

Overall, there is instability and uncertainty surrounding the UK house market in 2022, if there is a quick fix to the supply chain issues it will mean that more properties can be developed, quicker, causing a raise in supply which should level out the supply and demand figure. There are predictions that central city residential properties will see a recovery due to overseas buyers who are looking to relocate to the UK due to local political social instability- particularly from Hong Kong, China and certain African states.

The housing market does have obstacles to overcome going into 2022, but there is hope, the message seems to be clear: Keep calm and carry on.

David Hannah, principal consultant at Cornerstone Tax, discusses the outlook of the 2022 rural and city property market:

“I don’t think it’s a surprise that we have seen the recent 52% decrease in house sales in October, due to the end of the SDLT holiday, and I don’t think it’s anything to worry about.

The UK housing market continues to battle obstacles, with the disruption to the global supply chain (caused by the pandemic and the closure of the Suez Canal) continues. Causing a continued shortage of building materials, delays in the commencement and, indeed, the completion of many residential housing projects. This doesn’t seem to have discouraged buyers however, with most new developments (particularly those outside cities) already selling off plan, even with completion dates as late as May 2022 they are already being sold.

This shows a sign of that increased and, I think, persistent tendency to want a property with gardens near open spaces and countryside. Demand for inner-city apartments has started to increase. Interestingly that may not be a post-pandemic effect, but rather a geo-economic effect, with overseas buyers who are looking to relocate to the UK purchasing inner-city property

Whilst there is still some uncertainty heading into 2022 for the UK housing market, a solution to the global supply issues will cause an increased supply of new builds, providing the UK housing market with some much-needed extra stock”