Changing attitudes towards how people use their homes have been accelerating the housing market. As the sector continues to defy expectations, a new report looks at what the future might hold.
As the UK went into lockdown at the end of March this year, many were forecasting doom and gloom for the UK housing market. Most parts of the sector have had to reassess and change how they work to adapt to the ‘new normal‘. Meanwhile, many buyers and sellers put plans on hold as they waited to see what would happen in the market.
But fast-forward several months, and numerous reports are showing increasing momentum within the property sector. House price indices indicate buoyant values across the country, while transaction levels have begun to surge. That being said, there have been some major shifts in attitudes, confidence and commitment to buying and investing.
Now, a new report from Savills delves deeper into people’s changing habits and preferences post-Covid. Tellingly, it reveals that almost three quarters (74%) of people have “reconsidered their work-life balance” due to lockdown. Out of these, more than a third (34%) have had a “significant” rethink. These shifts are likely to lead to changes in the UK housing market.
Buyers are more determined
The Savills report focuses on the top-end and prime levels of the property market. However, there are many indicators that the effects are similar across other levels, too. The difference will be the varying financial freedom and security to buy, sell, move and invest among different household types.
However, the report points out that despite the current economic situation of the country, a net balance of potential buyers have in fact become more committed to moving in the next 12 months. Savills says this reflects “a behavioural response to a unique crisis – one where people have reassessed their work-life balance, how they want to live and where they want to live”.
Looking specifically at the prime market, sales of £1 million+ properties have risen over recent months. In June, July and the start of August, sales agreed were 35%, 98% and 116% higher than the same months in 2019.
The report adds: “In these circumstances, prices have stood up much better than many were initially predicting.”
Looking at the figures, the net balance of people who are more committed to moving in the next 12 months than they were before was +21% in mid-August. This is up from +9% at the end of April.
Positive sentiment and a new way of working
The Savills survey looked at how people’s priorities have, somewhat unsurprisingly, changed recently. The percentage of people who say a garden or outside space is important has risen from 49% in April to 62% in August. A further 57% now highly value a separate work space at home, up from 44%.
The number of people who rate a good internet connection remains unchanged at 48%. However, there’s been a big jump in people working from home, and in those who want to. 38% of people now say they are “significantly more inclined to work from home”, up from 18% in April. Even as offices have begun to reopen, the mood towards home-working from both employers and employees may have changed permanently.
When asked their views on house prices, respondents to the survey were largely optimistic. Seven out of 10 people believe house prices will rise over the next five years. Only two out of 10 expect them to fall, while 11% think they will stay the same.
On a more short-term level, respondents were more split on values in the housing market. Just under half (44%) of people think prices will rise over the next two years, with 44% expecting them to decline.
Changes in the rental market
Like buyers, renters’ priorities have shifted, too. This of course has a knock-on effect for property investors and buy-to-let landlords.
Savills has come up with a set of four “tenant profiles” that have changed since Covid-19.
The try before you buy tenant: Around 64% of Savills’ regional letting agents have seen a rise in this tenant type. In the company’s June survey, half of respondents said they would rent in the next six months if they couldn’t buy. And half of these said they would do so “happily”. This reflects a trend that has been shifting massively in recent years, of more people who choose to rent as a lifestyle choice.
Corporate tenants: Corporate tenants are now seeking larger properties for more senior staff, says the report. Savills expects demand from this type of tenant to rise as more people return to the office. However, it adds: “For the moment, this means that owners of flats, who have historically benefited from such corporate demand, need to take
a pragmatic view on asking rents.”
Non-resident tenants: Parts of London’s rental market have recovered slowly due to a drop in international travel. Demand should return, boosted by the stamp duty changes which will “supplement demand from April next year”. Because of the 2% additional surcharge for foreign buyers, some international travellers may be more likely to rent than buy from next year. This will mainly apply to those who only spend part of their time in the UK.
“We expect demand among this group of tenants to be focused on best-in-class properties that offer outside space and are located close to amenities.”
The ‘wait and see’ student tenant: Things have been very uncertain for university students in recent months. But the latest data from UCAS shows that student numbers are still higher this year than in 2019. Savills says many students will still want to live near campus to access any face-to-face teaching. However, it warns that travel restrictions may play a part over the coming months.
Landlords may “need to look beyond this source of demand in the short term, ensuring their properties appeal to a wider range of tenants.”