2022 has seen the secondary effects of the coronavirus and lockdown set in motion. With inflation rising worldwide and governments responding to this with a rise in interest rates – property and property finance have been directly affected. In this blog, we present a brief analysis of the change in property prices in the UK and Internationally during the year 2022.
UK Property price statistics 2022
Since the global financial crisis of 2008, the average property price in the UK has been on an upwards trend. However, in recent months we have seen a slight shift. The latest data from Halifax shows that average house prices decreased in three of the past four months. The latest -0.4% drop is the steepest since February 2021, taking the standard property price to £292,598.
Whilst the period of rapid house price inflation seems to have stabilised in recent months, it is important to remember that average property prices have risen by over £22,000 over the last 12 months and nearly £60,000 or +25.7% over the previous three years – meaning a slight correction was not a surprise.
House prices have risen 6.8% over the previous 12 months. However, given the cost of the capital’s average property of £544,113, London still recorded the most considerable cash increase out of any UK region over the past year, making it 73% (£229,835) higher than England’s £314,278 average house price.
The significant rises in the capital were in Brent £30,500 (5.5%), Kensington and Chelsea, up £21,000 (1.5%) and in Haringey, up £18,300 (3.0%). London property continues to be a safe haven for foreign investors and expats alike looking for a safe haven. Check out our case study on how we assisted a US national and resident secure financing on his London property purchase.
International property prices – French Riviera, Miami, Algarve, Paris, Swiss Alps
Real global house prices continued to rise in 2022 at 4.6%, with nominal house prices (before inflation was factored in) increasing by 11.2%.
Here is a breakdown of the global hot spots according to our clients:
Algarve (Portugal) – Algarve remains the most sought-after region in Portugal for international buyers looking for a holiday home in the sun. The Algarve is the most expensive region at 2,237 euros/m2, with Lisbon just behind at 1,986 euros/m2. 2022 saw another year of solid house price growth at 5.3%. This was a slight slowdown from 2021, which saw a record 7.9% increase – partly due to the holiday home rush that the coronavirus caused.
Paris (France) – Apart from its rich cultural life, the uniqueness of its lifestyle, and the beauty of its streets, this Capital offers investors a wide array of business opportunities and has a proven track record of attracting and retaining foreign companies and key talent.
According to Bloomberg, the real estate market of luxury homes in the City of love sold for record prices in 2022, partly due to US investors taking advantage of the strong dollar to snap up high-end overseas properties.
French Riviera (France) – Known for its beaches, views, picture-perfect water and being the playground for the wealthy, the French Riviera is one of the most popular destinations among HNW clients looking for paradise. With 70% of transactions being made by foreign nationals, house prices in this region have steadily risen over the past two decades.
However, according to the JDN 2022 report, the real estate market has shown signs of slowing following a strong 2020-2021. The study predicts that the market a decline by approximately 9%.
Miami (Florida) – Miami has long been a haven for property investors – from large towers to condos to commercial parks, they have consistently found profitable opportunities around the county. 2022 has proven no different, with the median house price in Miami increasing by 27.4% over the last year.
Swiss Alps (Switzerland) – Swiss real estate has long been a reliable long-term investment, with the Swiss Alps topping the list, arguably, home to the most exclusive real estate in the entire Alps region. Zermatt and St. Moritz lead the way with HNW’s flocking for the exceptional location and top-of-the-range amenities combined with elegant design, luxury and sophistication.
Rising interest rates, but has inflation already peaked?
Inflation has been the main talking point of 2022 and will remain in 2023. Central banks worldwide have been forced to raise interest rates to combat this rise. The Bank of England base rate has slowly risen throughout the year to 3.5% (from 0.25% at the start of the year) on the 15th December; the last time rates were this high was in November 2008. However, we must remember that interest rates are rising from a record period of lows – at no point, pre-2008, have interest rates been lower than 3%. Although it may be a shock, the actual cost is still relatively low.
In the UK, the annual inflation rate jumped to 11.1% in October 2022 from 10.1% in September 2022. It has been considered the highest inflation rate since October 1981, with main upward pressure coming from housing and household services – 26.6% vs 20.2%, namely gas (128.9%) and electricity (65.7%).
However, some commentators are speculating that inflation has already peaked. The latest inflation figures show that prices slowed as of November 2022 to 10.7%. Chancellor Jeremy Hunt has said getting inflation down is his “top priority” and has targeted it to be halved in 2023.
Mortgage property trends
London is one of the largest worldwide financial centres, attracting High Net Worth individuals from around the globe due to its proven long-term stability. More specifically – the London property market is where overseas investors come to seek fruitful returns. Articus can assist overseas buyers looking to leverage these property purchases, from simple residential homes to multi-story developments. Take a look at our Expat and Foreign National Guide, which explores the solutions available for overseas investors: download our free guide or take a look at our case studies which showcase some of the clients we have secured mortgages for.
Articus saw another year of high demand for buy-to-let properties. It’s interesting to note that buyers vary in their motive for purchasing BTL properties; for some, the rental yield is the motivator, whilst for others, it is all about capital appreciation. At Articus, we can secure financing for any motive.
Interestingly – but to no surprise – commercial properties have been highly sort after by both overseas and local buyers. The coronavirus period saw a significant drop in the need for commercial properties, with investors struggling to find tenants resulting in banks halting their lending. However, 2022 saw the turnaround with companies returning to the office and investors snapping deals. Take a look at this case study on how we assisted a British national currently living and working in Hong Kong. The client was looking to remortgage five commercial units they owned as investment properties.
The announcement to relax planning restrictions last year by Boris Johnson fueled yet another year of property development enquiries. Our HNW clients were mainly attracted to conversions from commercial to residential premises. Check out our case study on how we helped a long-standing client achieve this, and download our property development guide, which analyses the recent environment and the ways we can assist.
A breakdown of the different types of enquiries we saw:
Where do most prime Central London borrowers reside?
Articus analysed sales figures for London’s prime areas over 2022, finding that the average price paid for a property has stayed rather stable, now sitting at just over £3,343m.
Market activity in the main London market thresholds features a variety of foreign buyers accounting for 48% of that market activity- according to data compiled by Hamptons.
We compiled our own data to show where most of our enquiries and business came from in terms of residency. UK-based investors currently represent our highest part of the market. The US comes in second place, partly due to the weak pound, read our blog.
A breakdown of enquiries by residential status:
Conclusion; A positive year for our clients
2022 has certainly not been a ‘simple’ market, however, with volatility comes opportunity, and we’ve seen plenty of our clients make the most of the year. Although the price of debt has risen – the banks are still very keen to lend. Another point to mention – the ways to structure debt have never been so creative, making each case solvable, provided you know who to approach and how to present your case. If you’re looking to have a confidential and free consultation, do get in touch.
The next newsletter in early January will be our predictions and analysis for 2023.
