Housing market: What 2022 has in store?
EditorialRoom 30th December 2021
It’s been a year of running out of adjectives to describe the housing market during the COVID-19. What will the 2022 real estate market look like?
U.K.
After a stellar 2021, UK’s housing market may slow next year, according to the Nationwide Building Society.
The house price index (HPI) increased by 10.4% year-on-year in December after a 10.0% increase in November. On a monthly basis, the HPI rose 1.0% following a 0.9% gain in November. Economists had forecast a 0.5% increase.
“2021 was the strongest calendar year for house price growth since 2006,” the group said on Thursday (Dec. 30).
The average price of a typical UK home hit a record high of GBP 254,822, up by GBP 24,000 over the year, which was the largest rise in a single year in cash terms. Prices were 16 percent higher than before the Covid-19 pandemic struck in early 2020.
Prices got a boost from the extremely low stock of homes in the market throughout the year. Furthermore, demand remained strong though the stamp duty holiday ended at the end of September.
Wales was the best performing region this year, while London was the worst. The capital was the only UK region to see lower annual price growth in 2021 than in 2020.
The Nationwide Building Society expects the housing market to slow next year as many had brought forward their housing purchase in view of the stamp duty holiday to avoid extra tax.
“Even if wider economic conditions remain resilient, higher interest rates are likely to exert a cooling influence,” Nationwide Chief Economist Robert Gardner said. “However, the outlook remains extremely uncertain,” Gardner added.
Housing affordability is less favorable now than before the Covid-19 as house price growth has outpaced income growth by a significant margin over the past 18 months.
U.S.
A report released by the U.S. National Association of Realtors (NAR) on Wednesday (Dec. 29) showed an unexpected pullback in pending home sales last month.
NAR said its pending home sales index dropped 2.2% to 122.4 in November after jumping 7.5 percent to 125.2 in October. The decrease surprised economists.
A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.
“There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” said NAR’s chief economist Lawrence Yun. “While I expect neither a price reduction, nor another year of record-pace price gains, the market will see more inventory in 2022 and that will help some consumers with affordability” he added.
Meanwhile, housing experts told CNBC that in 2022, buyers can expect similar trends to the past two years: elevated prices, low inventory and fast turnaround.
CANADA
Historically-low interest rates coupled with insatiable demand created a red hot market. Canadian annual national sales broke the record record by October and prices are up the most ever year over year. RBC says housing affordability hit a 31-year low in 2021.
“Homebuyer demand is supercharged and inventories are near historical lows in virtually every market, creating intense competition between buyers and pressured prices up,” said RBC senior economist Robert Hogue, in a new report.
“These conditions have widely eroded housing affordability in the past year.”
No one knows exactly what the future has in store but experts are hoping for a more balanced market in 2022. They are also expecting demand to continue to outpace supply until the spring and summer.