This week, the Bank of England published analysis looking at the scale of house price growth since January 2020 and the key drivers behind it. The central bank suggested that just under half of the house price growth seen during this period is down to the ‘race for space’, as buyers look to larger living spaces outside of city centres.
The rest is down to other factors, including the stamp duty holiday and the savings households have built up over the various lockdowns as they have been unable to spend their money on leisure pursuits.
The analysis stated: “As the pandemic fades, the contribution of Covid-specific factors to price growth is likely to fall. But this analysis suggests that, absent further developments, there is unlikely to be a sharp correction in the level of house prices without a reversal in ‘race for space’ housing preferences.”
According to the latest house price index from Nationwide Building Society, house prices are up by 15 per cent since March 2020.
Brokers reported seeing this trend in action, but were split on how likely it was to continue in the future once city centres return to usual activity levels.
A better work/life balance
Nick Mendes, mortgage technical manager at John Charcol, said that it was clear that people were looking at their properties differently now, with many able to work from home at least part of the week.
He said: “As a result, the location, and what we are looking for has changed. With the commute no longer the main driver, households now have the freedom to move into new regions that offer work life balance.”
Mendes also pointed to the large lending figures reported by the second charge industry, noting that for those who have been unable to move there is still a desire to change their existing property to better meet their needs.
This was echoed by Dominik Lipnicki, director of Your Mortgage Decisions, who argued that change is here to stay, with many people having demonstrated to themselves ‒ as well as their employers ‒ that they can work remotely at least for some of the week.
This change is coming through in terms of what people want from their homes, according to Lewis Shaw, founder of Shaw Financial Services. He said that this included more outside space, more extensive open plan living areas, and being within a reasonable distance of both public transport and good schools.
Can the race continue?
Graham Cox, founder of Self Employed Mortgage Hub, said that increasing numbers of people working for themselves had played a part, alongside bosses being more flexible about home working, resulting in greater numbers looking for more spacious living conditions.
This would help sustain transaction levels for brokers, he said, though he cautioned that the ‘race for space’ may not be quite as dramatic in the future.
The scale of house price rises also meant that people were not quite as desperate to pick up these properties outside of city centres, according to Mark Dyason, owner of Edinburgh Mortgage Advice, as they have meant that increasing numbers of properties are simply too expensive for would-be buyers.
He continued: “Next year, with the price differential between urban flats and suburban houses having widened, it offers the opportunity for a resurgence of city living as our slumbering centres regenerate.”
City living will not be on the back burner for long, argued Jamie Thompson, broker at Jamie Thompson Mortgages, who suggested that when cities are up and running properly people will want to be “near the heart of the action”.
He added: “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.”
Creating opportunities for brokers
While brokers were split on how likely this trend is to continue, they were united in seeing it as an opportunity for mortgage advisers.
Lipnicki said: “This phenomenon, together with rising mortgage rates, is great news for mortgage advisers as we are needed more than ever to provide stability to our clients as well as fulfilling their home ownership goal.”
For Dyason, there is a chance for advisers to support their clients not only by talking about the market and the current trends, but also delving into their plans for the future, helping them to map a route to making this work.
And Thompson noted that any change in public preferences around housing presents an opening for mortgage brokers, adding: “It just depends how effectively you can get in front of the right people, or how effectively you maintain your existing client bank.”