Only a few weeks ago many property experts were predicting a wholesale change in the UK property market. We know that many people left London for pastures green in light of the COVID pandemic. This prompted the widely held belief that inner city (especially city centre) prices would come under significant pressure. However, a recent survey by RightMove suggests the very opposite.
Headline figures make interesting reading
The RightMove survey revealed a surprisingly strong increase in demand for city centre locations and in particular flats. The leading headline figures were as follows:-
• Demand for flats has increased by 39% since January
• Overall demand for city centre property is up by 35% compared to a 32% jump in demand for village property
• York, Norwich and Sheffield city centres are the most sought after
It will be interesting to see if this demand is sustained throughout 2021 and beyond. Whatever happens, those who called the demise of the city centre appear to be a little ahead of the game.
Value for money in city centre flats
Since the beginning of 2021 city centre property prices have registered 0% growth. During this period, the average property price in the UK has increased from £230,920 to £245,432, an increase of 6.3%. So, in reality the price of city centre flats has fallen in relative terms, compared to the rest of the UK market.
It is also becoming clear that the new 95% mortgage guarantee scheme announced by the UK government is injecting a significant element of confidence into the UK property market. As we approach the 19th July, and “Freedom Day” it is likely that this increased demand will push city centre flat prices higher.
Is working from home still an option?
When we finally get back to some kind of “normality” in light of the COVID pandemic, many experts still believe there will be an increase in the number of people working from home. Whether this increase is as large as many had initially expected, remains to be seen. Nearly 18 months of restrictions have also highlighted the benefits of social interaction, both in the workplace and outside. Many people yearn for the day that they can spend time with their colleagues and friends!
It would appear that first-time buyers are bucking the “work from home” trend with just 10% look to the countryside/coast, against 28% of current homeowners. This would indicate that the younger generation are less concerned about the long-term implications of COVID and looking to return to city centre life.
Is London back in vogue?
Time and time again, many experts have tried to write-off the London property market as a busted flush, too expensive and overvalued. These very same people were first in the queue to highlight a trend which saw many people leaving the capital for more “spacious” accommodation. Even though they were right to call this new trend, to suggest it was the beginning of the end for London is again, a seemingly incorrect call.
Even though we have seen the greatest increase in city centre demand outside of London, York (76%), Norwich (62%) and Sheffield (57%) there is renewed interest in the capital. Inner London boroughs are only slightly lagging behind outer London boroughs when it comes to an increase in demand for property. Since January, enquiries about inner-city accommodation have increased by 30% with outer London accommodation showing an increase of 34%.
Lockdown savings coming into play
As has been covered by numerous websites, even during the challenges of the COVID pandemic and resulting lockdowns, many people have managed to save money. Indeed, the RightMove report indicates that 60% of first-time buyers have been able to save more than they expected. This will allow them to put a greater deposit down on a property and reduce their mortgage exposure.
There is a significant divergence of trends between existing homeowners and first-time buyers. It appears that first-time buyers are more focused towards the city and those looking to move appear more focused on the countryside/coast. It may be that those with young children are more concerned about the long-term impact of the pandemic.
The King is dead, long live the King! Despite evidence to suggest that inner-city property markets such as London will be overtaken by their country/coastal counterparts, this trend is weakening. First-time buyers are more focused on inner-city properties. This is due to a mixture of value for money, available mortgage finance, and increased savings during the pandemic together with employment opportunities. Will inner-city flat prices respond to this significant increase in demand?