House prices soared during 2021.
Helped by the stamp duty holiday, introduced to stimulate the housing market during the Covid pandemic and extended through to the summer, house prices rose by nearly 10% in 2021.
The average cost of a typical home in the UK is at a record high of £254,822 - an increase of around £24,000 over the last 12 months despite enforced intermittent lockdown restrictions.
Growth has continued since the gradual easing of the stamp duty tax break, albeit at a slower pace, leading to many discussing what the future holds for the housing market in 2022.
Will the price of homes drop across the four nations, will the market crash or require government intervention, or will prices remain high across England, Wales, Scotland and Northern Ireland?
Let’s take a look…
Why are house prices so high?
Despite concern around Covid and the pandemic, the housing market has been buoyant over the past 18 months - helped by the stamp duty holiday.
Various restrictions used to halt the spread of Covid have seen people spend more time at home and their local surroundings since the early months of 2020.
That time at home has led to a desire for more space inside, as many people change working habits, and outside, with a greater dependency on private gardens.
This ‘race for space’ has seen an increased demand on these types of properties as well as people bringing forward timelines on moving houses to take advantage of the tax break.
Demand has surged, outstripping the supply of houses available on the market, pushing prices up and up to new record highs at a growth not seen since 2006.
How much is stamp duty tax now?
Following the end of the various stamp duty deadlines across the UK’s four nations, this is how much people moving house will have to pay in land tax:
England and Northern Ireland
- Up to £125,000 - Zero
- The next £125,000 (the portion from £125,001 to £250,000) - 2%
- The next £675,000 (the portion from £250,001 to £925,000) - 5%
- The next £575,000 (the portion from £925,001 to £1.5 million) - 10%
- The remaining amount (the portion above £1.5 million) - 12%
- £180,001-£250,000 - 3.5%
- £250,001-£400,000 - 5%
- £400,001-£750,000 - 7.5%
- £750,001-£1.5m - 10%
- Above £1.5m - 12%
- £145,001-£250,000 - 2%
- £250,001-£325,000 - 5%
- £325,001-£750,000 - 10%
- Above £750,000 - 12%
Will house prices drop in 2022?
Though the end of the stamp duty holiday is firmly in the rearview mirror, house prices have remained steady towards the end of 2021 and the early weeks of 2022.
The Nationwide’s latest House Price Index found that growth from December 2021 to December 2022 was 10.4% and prices rose by 1% from November 2022 taking into account seasonal variations.
Chief economist Robert Gardner anticipates the housing market will slow down in 2022 and raised concerns around the Omicron variant at the time.
He said: "Even if wider economic conditions remain resilient, higher interest rates are likely to exert a cooling influence. Indeed, house price growth has outpaced income growth by a significant margin over the past 18 months and, as a result, housing affordability is already less favourable than before the pandemic struck.
"However, the outlook remains extremely uncertain. The strength of the market surprised in 2021 and could do so again in the year ahead.
"The market still has significant momentum and shifts in housing preferences as a result of the pandemic could continue to support activity and price growth. Indeed, the Omicron variant could serve to reinforce the shift in preferences in the near term."
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