House prices: Will house prices drop in 2022? Expert predictions

House prices: Expert discusses 'interesting' pricing differences

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The property market has enjoyed an unprecedented 18-month boost, with prices continuing to rise even if the face of serious economic uncertainty. The average asking price for a home has surged to £360,101 – that’s a £19,082 increase over the past three months – and buyers are finding themselves desperately waiting for a drop in prices to avoid paying over the odds for a home.

What’s more, research from estate agent Savills has found the average price for homes in 15 percent of the country has now reached £500,000.

But even in the face of continually rising property values, speculation is rife that prices could drop as the cost of living crisis continues unabated.

Spiking inflation, rising interest rates, tax increases, and sky-high energy bills have all put significant strain on the finances of millions of Brits, causing some to put off their dream of buying a home.

Even in the early stages of the crisis, many wannabe homeowners have given up their search in the hope of a decline in prices later in the year. But do the experts think this will even happen?

Will property prices drop this year?

Experts have varying opinions on what will happen next for the property market in 2022 – but if you’re expecting a sudden drop in prices, don’t get your hopes up.

Anthony Codling, CEO of Twindig, told “Demand continues to outweigh supply, which in turn will underpin house prices and provide fertile ground for continued house price growth.

“Whilst some are talking about down valuations, in our view, the direction of house price growth remains up not down.”

However, Walid Koudmani from finance brokers XTB told that despite 10 months of consecutive rises, the market could taper off later this year.

He said: “While this is a concerning situation, the rate of house price growth is expected to slow later this year as incomes fail to keep up in a climate of record inflation and general cost increases.

“Until that point, we could be seeing a continuation of this trend which has led house prices to reach historic levels.”

David Hannah, Group Chairman at Cornerstone Tax, said any drop or tapering off in the market “won’t be as substantial as some people think”.

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He explained: “If we look at what has been going on – house price growth, retail inflation, energy costs surging, that’s going to put pressure on employers to raise wages.

“I believe wages will rise, meaning real spending power will not actually decrease.

“If you borrow a hundred thousand pounds today, the fixed figure of one hundred thousand pounds doesn’t rise in line with inflation.

“So, in five years time that debt is probably worth half what it is today.

“In high inflationary times with relatively low interest rates, it makes sense to borrow.”

Some property experts have argued this is why now is an excellent time to buy if you can afford the inflated prices.

Mr Hannah continued: “The debt is being eroded by inflation, whereas the value of the asset (the house) is actually going up in line or ahead of inflation. It’s a way to make real returns.”

However, Mr Hannah noted that longstanding issues have pushed prices up in the last two years, and are still prevalent today. That means a notable drop in price for buyers was unlikely.

He said: “The problem we do have is the rate of demand and supply.

“If builders are building and they’re over supplying, it will soften the increase and the appreciation in asset value. But, if the number of people wanting to buy houses continues to exceed the supply, then those prices are going to rise.

“We have an open market in the UK which means not only are domestic purchasers and investors looking to buy, but we also have inbound investors and a number of people relocating to the UK.

“Overall, I expect demand for UK housing to continue to outstrip supply – pushing price increases ahead of inflation and provided wages are increased, the affordability of housing will stay in lockstep.”

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