Property Finance Trends - 2022 Q2

At the end of last year, there was an inevitable flurry of predictions about what we’d see in 2022 in the property finance market. Now we’ve reached the end of Q1, we look back to see how the first three months of 2022 are likely to shape the rest of the year and what we predict for property finance for the next three quarters.

Inflation and energy prices

Rising inflation and energy prices have been headline news this quarter. Inflation and increasing energy costs have a knock-on effect on property finance trends, and these are likely to become more, not less pronounced, as the year goes on – particularly in Q3 and Q4 if the current cap rises further. 

The cost of living and property finance are always linked, and increasingly we see a shift towards energy-efficient and ‘greener’ properties as buyers everywhere in the market look to economise and safeguard against future price increases. More generally, the running costs of a property – especially larger homes, older properties and estates – are also more of a conversation with lenders than in the past and is something to expect if you are in the market for this type of property in the current economic landscape. Lenders want to ensure you can easily afford the upkeep, maintenance, and other costs associated with larger or older properties, and this will be especially important if you have an unusual income structure or are approaching retirement age.

Arguably, getting the best finance package today is more critical and more complex than at any time in recent years. As we’ve seen inflation rates and the BoE base rate rise, you may also wish to prioritise getting deals completed quickly and mortgage rates locked in. Our track record and expertise in this space is unparalleled in for prime property, and we move as swiftly as possible to meet your needs, whatever your ambitions and requirements. 

Demand remains high for second homes and international property

Kyero, a platform for UK buyers to view Italian, French, Portuguese and Spanish property listings reported a 45% increase in visitor searches for foreign property in 2021 compared to the firm’s 2020 figures. Demand for foreign properties continues to be high in the first quarter of 2022, driven by hybrid working, an uptake in individuals working fully remotely from abroad and the easing of travel and COVID sanitary conditions. The trend for more space and a different work/life balance are also likely to be contributing factors.

Are there signs the market is finally cooling?

While the property market has been buoyant since 2020 in terms of valuations and prices, almost everyone predicted that there would be a ‘cooling period’ this year where we’d probably see the peak of property valuations. Property prices cannot rise at the record rates of the past two years forever and must taper off at some point (usually when supply and demand balance rather than because of events that signify macroeconomic headwinds).  

While there is no defined tipping point, lenders have started to signal that they think house prices may be peaking in some parts of the market or areas. Reports are increasing of valuations coming in under sale prices, and often lenders won't extend a mortgage for the whole amount if this is the case. The amounts are not always huge and naturally depend on the price of the property in question, but this underlines that lenders are proceeding with more caution than before, and you should ensure you are not overpaying.

London and prime property prices are still on the rise

While some parts of the housing market are possibly starting to cool, at least in London, prices still seem to be on the rise. Bricks & Logic reported property sales in Greater London had risen by 2.1% in Q1 2022. The south and southwest of London saw the most significant increases, with property prices up 3.4%. 

If the number of £5 million-plus mortgage applications we are processing is any indication, we believe prime and ultra-prime UK property, especially in London, hasn’t peaked yet. Lenders remain keen to do business, and very competitive finance deals are still available. However, negotiations must always be centred on hard facts, assets and your net worth to get the best rates available, and Enness will need to bring the right details forward to secure the best mortgage for you.  

Commercial property

Commercial property is also in-demand. JLL reported that in Edinburgh and Glasgow the number of 5,000 sq ft deals in Edinburgh rose during Q1, compared to the same period pre-pandemic. We believe that while what tenants want from their office space is changing, office space will never go out of fashion and 2022 may well cement this. There is still a need and requirement for office space, but companies are assessing the merits of better-appointed o refurbished office space and/or downsizing to facilitate fewer employees in the office at any given time while others work remotely.

A word on the rest of 2022

The UK property market is flush with hundreds of opinions about what’s next – ours included. It can be easy to get caught up in the bigger picture, overall trends or conjecture about house prices, potential risk and trying to predict the top of the market. 

The reality in the UK is that we still see a robust property market with plenty of opportunity and demand – especially for prime property. We believe that the UK property market remains in good stead, and London retains its crown as one of the safest and most attractive cities in the world to own property.