In case anyone with a mortgage hadn’t noticed already, the housing industry has been one of soaring prices. Well, unsurprisingly, those prices have reached a new point of staggeringly high this year. Whilst, given the economic difficulties posed by COVID, cost of living prices were always going to rise, the housing market has seen rising prices since 2004, seventeen years ago.
Last year (twenty-twenty one for those of you who keep forgetting new year happened) house prices rose by an awe-inspiring 9.8%. More people than usual brought homes, causing prices in an already highly-priced industry to rise yet again. The pandemic was a cause, a year stuck inside meant that outside of impulse amazon purchases, most people spent less than they usually would. Particularly the lack of holidays made an impact, and then many decided to spend their money on a new house.
Surprisingly, London experienced the lowest average growth in house prices of just 4.1%, perhaps COVID made people appreciate the countryside more. Many moved to more rural areas, where they could spend the same on a much larger property than they would be able to afford in London. With people spending more time inside than previously, psychologists believe we may have become even more acutely aware of our lack of living space. This has increased the desire to upscale houses and meant more people than before have taken the plunge to buy a new house.
It is predicted that in twenty-twenty two consumer spending will decrease. Inflation is at 5.1%, which will squeeze people’s budgets and help encourage people to save. These higher inflation rates may also mean interest rates rise, meaning mortgages become more expensive. Even then, increasing house prices seem likely, considering the number of houses available has not gone up by much.
Russel Galley, managing director of Halifax said the housing market in twenty-twenty one “defied expectations.” Even though people were locked down, they still came out to buy new houses. He too attributed the success partly to people not spending money on holidays and other luxuries. From Halifax’s point of view, it was an excellent year, but rising prices are not ideal for the consumer who is going to be tied up in debts for the next possibly twenty or forty years.
Last year, house prices rocketed, and as per usual with market forces, they’re not due to experience such high prices this year. Issues in the housing market make it seem likely that prices will continue to rise, however, as demand increases and supply fails to reach a sufficient number. Probably just not rise as much as they did in twenty-twenty one, which as many find easy to forget, is now last year.
Written by Adam Caudle Research compiled by Ibrahim Ahmed