Housing budget 2022 predictions

“Would you do a UK housing market forecast” they said. “Easy”, I lied.

It doesn’t take a genius to work out that if house prices rise faster than earnings, eventually we will reach a point where they become unaffordable, stagnate and in some areas, start to fall in line with earnings. And affordability is in the hands of the mortgage lenders.

There are a thousand reasons why the last two years saw such unlikely house price growth, not least of all was the relatively overlooked quantitative easing last year, which enabled lenders to keep doing their thing. The charts below illustrate the correlation well.


So, in order to forecast the coming year, the question is, how big a part did this play, and is it likely to happen again?

There’s no doubt that the pandemic fuelled a realisation that our homes are the ‘centre point and safe place’ in our lives, and this drove a desire to make our home environment as perfect as possible. The pandemic lockdowns may be over, but will war in Europe create a similar feeling?

If it does, it will still have to overcome some pretty substantial forces coming the other way:

  • Consumer confidence is at its lowest since the last financial crisis
  • Low stock coupled with fierce competition may put buyers off moving until it improves
  • Huge increases in the cost of living
  • Rising inflation

Given that these are tangible and relatively immovable objects, they will have more of an effect than a consumer desire, and I believe we will see the full year growth figure settling at 3-4%, with transactions sitting at around the 1.3m mark.

In today’s Spring Statement, I expect we will see Mr Sunak throw in a few gestures to help with the approaching ‘perfect storm’ – including a reduction in the planned NI hike and a reduction in the tax on fuel, but overall, it’s going to be a tough summer.

It’s simple then; demand will still be there, even if the stock and affordability isn’t, which will create a plateau for prices.

Unless of course, something else unpredictable happens!