Will there be a housing crash in 2022? Here’s what the data says
Spoiler alert: no, we don’t think there’ll be a housing crash in 2022. Let’s take a look at why the UK market is on track to avoid any major falls in house prices.
The housing market’s set to slow down later this year. There’ll be fewer sales and house price growth is easing.
But buyer demand is still tracking in line with last year, as we explain in our latest House Price Index.
The market’s proving more resilient than anyone expected, even in the face of economic headwinds.
And we don’t see a housing crash on the horizon.
Why not?
Well, a huge amount of change since the Covid-19 pandemic has opened up the housing landscape in the UK.
It’s given us greater choice over where we live, highlighted our relationships with our homes, and altered our reasons for moving.
And the housing market’s in a very different position to the last time we saw house prices fall, after the global financial crisis of 2008.
Let’s take a look at what’s changed in the last few years, and why it means there won’t be a housing crash.
House prices aren’t as overvalued as they were in previous economic cycles
“House prices tend to fall when they get too high and out of kilter with incomes,” says Richard Donnell, Executive Director of Research and Insight at Zoopla.
“In the past, this has gone hand in hand with more relaxed mortgage lending.
“In 2007, more than a third of buyers taking out a mortgage didn’t prove their income to the bank. And almost a fifth were getting mortgages when they had small deposits of less than 10%.
“This led to house prices shooting up. Then, when mortgages dried up and the economy went into recession, prices fell back.
“The difference now is that there are much tougher rules to get a mortgage.
“You must prove a lot more about your income and outgoings. People usually have much more than 10% deposits so they are less vulnerable to possible negative equity.
“In short, we don’t have the scale of over-valuation of housing that we’ve seen before.
“This puts the market in a much better position to weather high mortgage rates and the increased cost of living.
“The housing market is not immune from these pressures and some will already be feeling the squeeze. But the likelihood of big price falls is much lower than in the past.”
House price growth has spread across the country
House price growth has spread around the country.
It’s no longer London and the South East that are tracking the biggest house price gains.
Instead, we’ve got the South West, Wales and the Midlands seeing double-digit house price growth.
With higher demand in new areas, the value of housing has started evening up across the country.
In fact, the average UK home has risen by £48 a day since February 2020. That's the equivalent of £38,000.
And when you’ve seen your house price rise, it’s another incentive to sell. Many people want to release equity or take the chance to upgrade their home.
More people want to move because of the pandemic
In a recent survey, we found that 22% of people were more keen to move house since the pandemic. Only 6% were more keen to stay put.
Of existing homeowners, 19% were eager to move because of the pandemic.
Those figures might not sound very high.
But when only 4% to 6% of owner-occupiers move house each year, it’s a massive proportion.
Was this just a short-lived, post-lockdown thing?
Nope.
We asked consumers the same question in 2022. And for those who want to move home, they’re even more certain it’s the right choice.
“The data suggests that attitudinal changes have matured,” says Richard. “They’re both more considered and more embedded within households.
“And when you have buyers with their mind set on a move, the market will keep moving too.”
Thinking all these committed buyers have already made a move?
Only 1 in 17 privately-owned homes changed hands in 2021. That means plenty of people who want to move and haven’t yet taken the plunge.
Hybrid working is here to stay
In February 2022, 42% of people plan to work mostly from home, according to the Office for National Statistics. That’s an increase from 30% in April 2021.
That’s around five million more workers who are now able to work from home when they want, and a total of 9.7 million people.
“We’ve seen a strong trend between home working and the desire to move home,” says Richard.
“Our consumer survey found that home workers are five times more eager to move than those with more traditional working patterns.”
54% of those who expected to work from home more said they were more eager to move, compared with 13% who expected to do less working from home in future.
Working from home patterns have been a major contributor to the demand to move home in the last two years. We expect this influence to continue in the years ahead.
First time buyers are more motivated to get on the ladder
The working from home trend has granted a huge amount of opportunity for first time buyers.
“In our survey, renters were the most keen to move house out of anyone” says Richard.
“25% of renters said they were more eager to move because of the pandemic.
“With less of a need to live close to the office, first time buyers can look further afield for their home.”
We’ve seen a marked increase in the radius that first time buyers are searching in since the pandemic.
“A first time buyer in London now considers homes in an area 33% bigger than pre-pandemic,” says Richard.
“And first time buyers outside of London stretch their search by a further 20% since the pandemic.”
“This shows that many first time buyers would rather get on the ladder now in a cheaper area using their current savings, than wait until they can afford a more expensive area.”
We’re still keen to swap city life for country living
It’s been one of the biggest talking points about the housing market since the pandemic.
That we all want to switch the city for a slower pace and more space.
And our research shows this trend is even more pronounced a couple of years on.
“Back in July 2021, people living in major cities were far more likely to want to move house (36%) than those in rural areas (3%),” says Richard.
“Fast forward to spring 2022, and 44% of city dwellers want to move to a more rural location.”
“Interestingly, more rural homeowners fancy a move this year, too (8%).”
“This is typically older homeowners looking to downsize. The influx of demand to rural areas has created more opportunities to relocate closer to family or take equity from their current home.”
More people are retiring
Almost half a million older workers have left the labour market since the pandemic.
A huge 63% of adults aged 50 to 70 left their job sooner than expected, according to the Office for National Statistics.
Leaving work to retire was the most commonly reported reason (47%). But 15% of retirees said they left because of the Covid-19 pandemic, and 13% cited illness or disability.
Retirement is a common trigger for selling your home.
You might want to be closer to family and friends. Some are looking to embrace a new lifestyle or indulge in a passion, while others want to downsize and release some equity.
There may be other practical reasons for a move in retirement, like the need for good public transport or healthcare nearby.
With 75% of older households (65+) owning their home outright (GOV.UK), this group has the means to make a move that suits their lifestyle. They’re keeping momentum in the market by offering homes for sale while also buying a new place.
Rising mortgage rates won’t hit existing homeowners too hard - but it will prompt some to move
Half of all homeowners have a mortgage, and the rest own their homes outright.
Of homeowners with mortgages, 90% are on fixed rate deals for up to 5 years. Many are on low rates of sub 2%.
So most homeowners with mortgages will be unaffected by interest rate increases due to their fixed rate.
And if they got their mortgage post-2015, they will have had to prove they can afford a mortgage rate of up to 7%. This means many homeowners will be able to absorb additional cost pressures on their budget.
Rising interest rates can also prompt some savvy homeowners to make a move. If they’re coming to the end of their fixed term, a move could help them lock in a rate they might not see again for several years.
With most mortgage offers lasting just six months, this impact will dissipate soon. But we expect it to be one factor that keeps the market buoyant in late 2022.
Key takeaways
- House prices aren’t as overvalued as they were in previous economic cycles
- Value has spread across the country, giving more people the ability and motivation to move
- More people are working from home, retiring and reevaluating their lifestyle, which all prompt sales and purchases
- Nearly a quarter of people said they want to move house since the pandemic, but only 1 in 17 privately-owned homes changed hands in 2021
What does the latest house price data mean for you?
Will your home keep rising in value? Should you hold off from moving? And will there be a housing crash? Here’s what the latest data from our House Price Index means for you.
There’s a lot of noise around the UK housing market. And it can be hard to know when to stick, twist or make your dream move.
Richard Donnell, Director of Research and Insight, answers some of the most common questions about the UK housing market and how it will affect your home or move.
Will my home continue to rise in value this year?
“The vast majority of UK homes have risen in value over 2022 and most will continue to do so over the rest of the year, albeit at a slower pace.
“The outlook for home values really depends where you live and how affordable homes in your area are, compared to the wider market and nationally."
“Price growth is much lower in the more expensive parts of the UK where prices are high and many times the average salary. If you live in London or the South East, you’ll see a slower rate of growth.
“But if you live in a more affordable area, there’s much more room for prices to increase. Even if mortgage rates keep rising.
"So if you live in Wales, the South West or the East Midlands, you’ll continue to see strong growth in the value of your home in the second half of the year."
Is now a good time to put my home up for sale?
“The average homeowner moves once every 20 years. It’s a big decision and is likely to be linked to what’s happening in your life, whether it’s finding a partner, starting a family or retiring.
“Lots of people worry about timing their move with market trends but this is rarely a successful approach.
“It's all about whether it’s the right time for you and your family.”
“Beyond that, it’s about getting the best advice to make your move successful.”
“The most valuable thing you can do is speak to an estate agent long before you want to make your move.
“Agents are always willing to give would-be sellers advice on the market. They can also recommend what you can do to make your home as attractive as possible to buyers.”
“Don’t wait until you’re ready to put your home on the market or have found your next home.”
If I put my home on the market now, how long will it take me to sell?
“The average time to sell a home across the UK is currently 21 days. This compares to 22 days a year ago.
That’s 21 days from listing your home to accepting an offer. It could be a further 1 to 3 months for the legal side of things to go through.
“But keep in mind that the average sales period varies market to market and by price level."
“Ultimately, the time to sell a home will depend on each home and its asking price – and how closely this is linked to what buyers in the area want to pay.
“While the market has been hotter than normal recently, more expensive homes tend to take a little longer to sell. It’s the same for homes that are little out of the ordinary from the typical three bedroom semi-detached house."
Which types of properties are most in demand at the moment?
“Three bedroom houses have been the most in-demand properties in the last three months.
“44% of all enquiries on Zoopla are for three bedroom houses. The pandemic has driven a ‘search for space’ which has boosted interest in these family homes.
“But cities tend to have a greater supply of smaller homes and apartments, and this is matched by greater demand for them. This is particularly the case in London and Scotland, where apartments are most in demand.”
Will there be a housing crash?
“We can never say never, but no – we don’t think there will be a housing crash.
“Double digit falls in average prices are highly unlikely, even as we face higher mortgage rates and increases in the cost of living.
“House prices only tend to fall when there are forced sellers. That’s people who can’t afford their mortgage and have no option but to sell.
“But in the UK, less than half of homeowners have mortgages. 85% of those who do have mortgages are on fixed rates for 3 to 5 years. This insulates the market from short-term changes in mortgage rates.
“We already have tough affordability checks for buyers, too. History shows that falling house prices tend to be preceded by looser lending standards.
“For these reasons, we expect slower rates of growth or flat prices rather than big price falls.
“It would take interest rates rising much higher or for the strong labour market to turn on its head before we saw a housing crash.”
I’m a first time buyer. Should I buy now or hold off?
“At a time of increased uncertainty, like now, some first time buyers are waiting as they think homes may become cheaper.
“But the reality is that there have only been 31 months with house price falls in the last 20 years. Those months were all between 2008 and 2012.
“So I wouldn’t wait and hope for homes to become cheaper. Prices are set to keep rising slowly in most places.”
“If you think your household income will be steady or rise over the next 2 to 3 years, there’s limited point in delaying.
“Just spend plenty of time doing your research. Find a home that meets your needs and for which you feel you’re paying a fair price. Get advice about mortgage finance to help with this.”
I’m looking to downsize. Will I be better off moving now or later?
“In my opinion, worrying about the housing market and what will happen to prices should come second to your personal motivations for moving.
“You might’ve realised you have too much space or are facing high running costs.
“You might want to move closer to friends and family. Or look to take some equity out of your current home to fund your retirement or specific purchases.
“Whatever the market’s doing, there are ways to maximise the value of your home when you sell.
“It starts with talking to a local estate agent. They can tell you what buyers are looking for and what you can do in the current market to get the best sale result.”
I’m a homeowner. What do rising interest rates mean for my mortgage?
“85% of people have opted for a fixed rate mortgage in the last few years, often up to five year terms.
“If you still have several years left on your fixed term, interest rate rises won’t impact you until then.
“But higher mortgage rates will be an issue if you are coming to the end of your initial term for your fixed rate.
What changing interest rates could mean for you
“It pays to shop around and look for the best mortgage from different lenders. But keep in mind that lenders always look to offer their current customers some of the best deals.
“It’s probably unrealistic to expect a fall back to the low mortgage rates we’ve seen in the last few years.
“But even with the recent increases, borrowing costs are low by historic standards.”
Key takeaways
- Your home will probably continue to rise in value during 2022, albeit at a slower pace
- You’re likely to sell in 21 days if you put your home on the market now
- The most valuable thing you can do? Get personal advice from a local estate agent long before you’re thinking of selling