The trajectory of the UK property market this year is only becoming clearer gradually as it shakes off a heavier-than-expected hangover from Covid, according to Knight Frank.

The estate agency says that the UK housing market has still not snapped back to normal since Covid restrictions were lifted.

‘Lower for longer’ is a term used by some analysts o describe how interest rates have remained close to zero for more time than expected. For Covid-19, the equivalent expression would be ‘linger for longer’.

Supply is a good barometer to gauge how much of an impact Covid continues to exert, but there was only a modest increase in the first six weeks of this year.

While supply is improving, demand is consistently strong. The number of new UK prospective buyers in January was 54% above the five-year average.

The supply-demand imbalance suggest that 2022 will be another strong year for transaction numbers and prices.

The ‘linger for longer’ story is also true for the UK economy. The Bank of England has successively revised up its inflation forecasts and warned that the cost of living squeeze will be felt into 2023. Supply chain disruptions have played a central role in that story too.

While that will increase the clamour for interest rates to rise, any impact on the housing market is unlikely to be notable in the short-term. Despite the cost of living squeeze, rates remain low by historical standards. The growing popularity of fixed-rate mortgages will also blunt any immediate financial impact.

There are even more moving parts to consider for prime property markets in London and the South East, Knight Frank said.

The number of overseas passengers arriving in the UK this year will affect those markets but is far from straightforward to predict.

There was an initial flurry of buyers who arrived in London in the final months of last year after travel rules were relaxed, benefitting prime new-build developments in particular.

That said, demand will pick up in the spring given how international buyers tend to follow more seasonal buying patterns. An increase in demand could push prices higher if it is not matched by rising supply. Prices in PCL are already in gentle recovery mode after six subdued years.

Not all buyers appreciate this underlying trend, according to Stuart Bailey, head of prime sales in London at Knight Frank.

“A growing number of vendors realise it has become a sellers’ market,” he said. “The shortage of stock means it is a good time to list. The return of international buyers will accentuate the supply-demand imbalance but buyers and sellers need to realise that prices have turned a corner in PCL anyway.”