Knight Frank: UK house price growth will peak as cost-of-living climbs
UK house price growth is thought to have peaked and will begin its descent away from record figures as the cost-of-living crisis in the country swells, researchers at Knight Frank forecast.
With runaway inflation and rising energy bills, the list of obstacles in front of house buyers has continued to grow exponentially since the pandemic.
The average price of a house is now a record £282,753, according to the Halifax House Price Index, a steep increase of £43,577 in just two years after the UK’s first Covid-19 lockdown.
“The UK property market has defied gravity over the course of the pandemic. Tight supply, low interest rates, accumulated household wealth and a desire for more space and greenery have conspired to produce double-digit house price growth over the last year,” Tom Bill, head of UK residential research at Knight Frank, said.
“We believe that 2022 is when this begins to unwind, and growth returns to single digits.”
It chimes with comments made by Halifax managing director Russell Galley last week, who also thinks the average price of a home is close to peaking.
The property consultancy, headquartered on London’s Baker Street, expects house prices to grow between four and five per cent this year, as opposed to the 11 per cent it jumped last year.
With a shortage of housing stock leading to a frenzy among buyers, doubt being cast onto the viability of the government’s pledge to build 300,000 new homes a year has further curtailed hopes of climbing the property ladder.
Oliver Knight, head of residential development research at Knight Frank, added: “At a national level, the rental market is being shaped by a deepening supply and demand imbalance.”
However, regulatory reforms around minimum energy efficiency standards, “have the potential to limit supply from mortgaged landlords further”, he said.
The issue of high demand and low supply has continued to seep into the UK’s rental market, with housing stock ‘drying up’ as staycation rules were eased along with other Covid-19 measures.
While Knight Frank has forecast countrywide rents to increase by an average of eight per cent over the next 12-months, Bill expects levels to “normalise” from next year.
Prime central London rental growth will struggle to push past four per cent from 2023, as the market begins to relax after the sustained pandemic frenzy.