Is 2022 The Year to Buy Property?

Global property markets entered 2022 following another year of strong growth, with the Covid-19 pandemic doing little to weaken demand for homeownership. In many markets, changing lifestyles and a growing preference for more space helped fuel buyer activity and push property prices higher.

However, the outlook for 2022 was becoming more complex. Rising inflation, the prospect of higher interest rates and the potential for further disruption from the Omicron variant all created new uncertainty for property buyers and mortgage markets.

Consumer price growth had accelerated sharply across a number of major economies, reaching 6.8% in the US, 6% in Germany and 5.1% in the UK. With property values having benefited from more than a decade of low-cost borrowing, the prospect of rising mortgage rates became an increasingly important consideration for buyers.

Despite these potential headwinds, major global cities remained resilient. New York, Los Angeles, London, Tokyo, San Francisco and Paris continued to rank among the world's most resilient urban property markets, supported by their importance as centres of business, innovation and economic activity.

The outlook for prime property remained particularly positive, although the pace of price growth was expected to slow. Markets including Miami, Sydney, Los Angeles, Auckland, London, Geneva, Madrid, Singapore, New York and Hong Kong were all expected to see further growth during 2022.

Strong demand for second homes, increased household savings accumulated during lockdowns and a limited supply of attractive properties were expected to continue supporting the prime market. Higher interest rates were also likely to have less impact at the top end, where a greater proportion of buyers are able to purchase with cash or have stronger financial foundations.

For those using mortgage finance, the changing interest rate environment made early financial planning increasingly important. Buyers needed to consider not only current affordability, but also whether they could comfortably service their borrowing if rates continued to rise.

Longer-term fixed-rate mortgages were becoming an increasingly relevant option for borrowers seeking greater certainty over future repayments. Fixing mortgage costs for five, 10 or even 15 years could help protect against further increases in borrowing costs, particularly as long-term fixed products had already started to become more expensive.

This was particularly important for buyers purchasing off-plan properties, where mortgage finance can often be arranged well before a new-build development is completed. Securing suitable finance early could provide greater certainty in an environment where interest rates and lending costs were expected to change.

While rising interest rates could cool the pace of global house price growth, a sharp correction was far from inevitable. In many markets, demand continued to outweigh available supply, suggesting that higher borrowing costs could result in a more gradual slowdown rather than an immediate fall in property values.

For buyers, the key consideration remained affordability and long-term ownership. Property purchases should be based on a clear understanding of financial commitments, including the ability to manage repayments if interest rates rise. Buyers should also consider local taxes, purchase costs and, when purchasing internationally, the potential impact of foreign exchange movements.

Overall, 2022 presented a more challenging environment for global property markets than the exceptionally strong conditions seen during the pandemic. However, limited housing supply, continued demand and the resilience of major global cities meant that a widespread property market collapse remained far from certain.

The National News