Mortgage Solutions 'Race for Space' article

ended 14. December 2021

A journalist at Mortgage Solutions is writing a piece off the back of this analysis from the Bank of England that suggests that a 'race for space' - an increase in demand for properties outside city centres during the pandemic - accounted for around half of the house price growth seen since January 2020. Do you believe this is true, and is it something you've seen with your clients? Also, do you think the race for space is going to continue to be a big driver of moves in 2022? Lastly, does it present opportunities for advisers?


8 responses from the Newspage community

Without a doubt, the pandemic has changed the housing market, likely for good. Off the back of the working from home phenomena and more technology implementation, it's never been easier to live anywhere if the need to commute to an office is no longer a necessity. As a result, we've seen a change in what people want from their homes. These include more outside space, more extensive open plan living areas & within a reasonable distance of public transport and good schools. With this has come the rise of the 'affluent mover', which we can broadly define as property wealthy but disposable income poor, generally working in a pro/semi-pro role in middle to upper management. They typically bought a while ago have seen their property wealth increase but have not had any direct benefit due to living within commutable distance of work. They've now been able to exit the city conurbations into all parts of the country, which accounts for why London has been lagging massively during the most significant house price increase in the last 30 years, & why parts of the UK have seen upwards of 14% growth. For example, it takes approximately an hour to get to London from Newark yet the difference in average house price is a staggering £500,000.
The race for space will continue I believe, just not not as dramatically as we saw in 2021, which was mainly driven by lockdowns. Employers are now being more flexible about home working. Combined with increased numbers of self employed, the trend for more spacious living conditions should continue for the foreseeable future. Helping sustain transaction levels for brokers and the mortgage market generally.
With city centres slow to re-open, families having been locked down in flats and only allowed 1 hour a day of exercise the 'race for space' has been frantic. This drive is slowing as prices have been pushing past some people's budget. Next year with the price differential between urban flats and suburban houses having widened if offers the opportunity for a resurgance of city living as our slumbering centres regenerate. Advisors have an opportunityto support clients by talking not just about the market and curret trends but also about the their plans for the future and map a route to making this work.
I don't think city living will be on the back burner for long. Sure it's great moving out of the city when everything in the city was closed for the best part of a year, but ow it's back open those that want to be near the heart of the action can be. I think the race for space was more likely people who would naturally have looked to move out of urban areas anyway in the next few years as people tend to do as they mature, but the pandemic just spurred what would have been several years worth to do it simultaneously. Any change in public preferences when it comes to housing is an opportunity for mortgage brokers. It just depends how effectively you can get in front of the right people, or how effectively you maintain your existing client bank.
The lockdown's certainly meant that outside space jumped up people's list of priorities when thinking about property, but more than that I think the change to more home working meant that people's acceptable commute times extended - as a 2 hour commute each way everyday is a no no, but only once a week? Maybe that's OK for a better home life. This change seemed to impact London the most, as people were making huge compromises in terms of their homes to stay within an acceptable commute to work. As the working patterns changed it gave them options to move further out and get a lot more house for their money, this in turn drove up house prices in many areas, as people competed for the best properties. What happens next is going to be defined by two completely separate factors: 1) is the shift to more home working permanent, or will we see people return to office working over the next few years? 2) how will city centres re-imagine themselves if they are no longer business hubs? The former is simply a return to the way we were, but the latter presents an interesting opportunity. Could we see an influx of apartments and more affordable city centre homes, aimed at younger purchasers? Only time will tell, but it could be the shot in the arm needed for the High Street, helping them to compete with the Malls and out-of-town shopping centres that have stolen their souls by having a population of vibrant and social people to cater to on thier very doorstep.
We have seen the demand for property outside of cities vastly increase during 2021. The greater flexibility of remote working, combined with a shift in social attitudes towards desire for better work life balance, has undoubtedly brought many homeowners to realise they do not need to live in the city, to work 'in' the city. It's one positive lesson the pandemic has taught us. We expect this trend to continue into 2022. Non-city property prices will be primarily governed by supply and demand, and demand is vastly out-stripping supply. However, the 2021 backdrop of a stamp duty holiday and low interest rates provided a rampant catalyst to the property market. Stamp duty is back to normal, inflation is on the rise, and a BoE interest rate rise is imminent. We expect these factors to placate the market as 2022 progresses, although at this stage it's not clear by how much.
The fate of city center properties lays partly with employers and if they continue to be flexible with their work from home approach. Many of my clients have moved out of cities into larger, more rural properties as a result of this but what I have found is that not many employers are happy to make the arrangement contractual. If Employers reverted back to office working, which they are obliged to do, then we could see everyone flooding back to the city!
The race for space will rage on as more companies are embracing remote working and those who wish to live away from the city centres will look to move and embrace it earlier instead of when they retire but I have seen just as much demand to live within 10 to 15 minutes of a city centre and good transports links are just as important as not ever job can be done remotely and some prefer to be closer to city centres for all the amenities that you can't get in the sticks.