How should advisers and clients approach the transactional housing market in 2022? Will it become 'normalised', and what does that even mean for consumers?
After 18 months of intense activity, it is beginning to feel as if the transactional housing market is becoming more normalised.
There has been a softening of the market in the past month or so, and a greater seasonality seems to be coming back, heralding the return of historic trends.
The expectation now is that the first quarter will once again start more quietly and then ramp up into the summer months, which have traditionally always been the busiest.
While it is difficult to predict the housing market, the recent slowing down in activity seems unlikely to be the prelude to a serious housing market crash.
What is more likely is that it will just start to settle down to some much-needed normality. What we need is for less intervention so the market can stabilise for a while.
There continues to be a huge shortage of housing with demand continuing to outstrip supply. This, together with the stamp duty holiday, has led to house prices escalating.
Until the government reaches its aim of building 300,000 properties a year, house prices no doubt will continue to increase, although perhaps at slower rates than we have seen in the past year.
The extension of the stamp duty land tax holiday deadline from March to June, followed by a tapering to September in England, resulted in a consistently hot market for about a year with three very noticeable peaks.
There is a still a sense of confidence among consumers. While there was an inevitable drop in housing transactions in October and November following the end of the stamp duty holiday, this was more because of the artificial peaks it created rather than any diminishing in the demand to buy property.
Prospective purchasers appear to be taking the view that if they want a property they need to act decisively or lose it. If there was more housing stock on the market, maybe that would not be so much the case, but lack of stock has meant that they do not have the luxury of changing their minds.
When the opportunity of saving on stamp duty was there, people understandably wanted to save money where they could. But, in our experience as a law firm providing conveyancing and remortgage services, people’s priorities have now changed.
There was an expectation that if people’s house purchase had not completed in time for the end of the stamp duty holiday then they may well pull out and we would see whole housing chains collapse as a result.
In reality that never happened, and people went ahead with their purchases. Arguably this is sensible with house prices rising at such a rate.