How and why the UK property market suddenly looks different
A panel of property experts finds buyers looking for vibrant communities in the lockdown property market.
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Please note: The panellist opinions in this article do not constitute formal advice. Please contact your private banker or wealth manager if you’d like any more information on the topics discussed.
As we highlighted in our latest Coutts London Prime Property Index last month, buyers and sellers emerged from the first lockdown ready to do business. But it’s not just pent-up demand that’s driving a resurgent property market. With many of us working from home, our relationship to our homes has been transformed.
At a special event for Coutts clients, we assembled a panel of property experts to take a detailed look at what the future holds for the UK property market.
Rethinking our homes and communities from the inside out
Kevin McCloud – designer and host of television show Grand Designs – observed that home trends have previously been driven by external factors, from the design industry as much as anything else. But in 2020, trends have been driven ‘from within’ as we spend more time in our homes.
“We’ve come to look at homes more critically. To view them not simply as assets but as hardworking tools that have to provide for us and sustain us. It's a place to take a little bit more pride, more interest in, a place to carve up, to re-work, to re-shape,” he said.
He emphasised how changing work patterns could lead to the creation of more resilient communities. “One clear result of a three-day week in the office and two-day week at home, is the way in which you don’t only spend more time in that community, but you become more dependent on it. All that infrastructure that is available in the office, you suddenly need at home.
“If you don’t have good broadband, then there’s a good argument for a community to come together and say, ‘Why don’t we invest in a satellite system between us and put it in the post office? Why don’t we actually help the post office and the pub carry on? Why don’t we convert a room in the pub to provide us with some office supplies, or a bit of social interaction, or a café during the day?’
“These very, very small steps seem at the time so hard won, and they seem to be so small as to be insignificant in the face of the challenges the planet faces. But that social resilience is enormously powerful. It connects people. When things go wrong again, they can rely on each other.”
From the city pad to the suburban home… and back?
Nathan Brooker, property editor at the Financial Times, described how the trend for smaller, centrally-located homes that’s driven the prime market since 2008 has reversed this year. “During lockdown, when homes needed to double as workplaces, nurseries and school rooms, people started to see the deficiencies in that way of living and there was definitely a reassessment.”
Sales trends on the post-lockdown market reflected the change in priorities. “You could see that translated in some of the sales figures agreed in commuter belt places. In August, sales of £1m plus homes in Guildford were 323% higher than they were in August 2019, specifically because they needed to use their homes in different ways.”
However, Katherine O’Shea, Director of the Coutts Real Estate Investment Service, observed that London remains an important location for buyers.
“We’ve had some clients say that commuting distance is less important but, in reality, I think ease of access into London will always be important,” she said. “I don’t think it’s a case of people flicking from London to the country – London remains an important market, but I think people are looking for some sort of outside space solution.”
Property investment opportunities for 2021
Tom Bill, head of London residential research for estate agent Knight Frank, highlighted some of the key opportunities for buyers heading into 2021. In particular, some of the neglected areas of the markets in 2020 could rise in price in 2021 if the arrival of a Covid-19 vaccine sees life return to normal.
“Between May and October this year, the one property type to register the biggest fall in asking prices was large flats, as more buyers in that segment switched to houses,” he reported. “Certain patterns of behaviour that have been established in 2020 will begin to unwind to some degree. For investors who can see through the fog of this pandemic, three bed flats may look like a great buying opportunity at the moment.”
Katherine highlighted that one of the biggest opportunities was for international buyers. “Effectively there are four ways they can save money. There are two on stamp duty: the stamp duty holiday, and buying now before the stamp duty surcharge comes in [for foreign buyers]. And then there are the two savings on prices. There’s the currency saving, but also the fact that property values – particularly in prime central London – have come off quite significantly since 2014.
“In Knightsbridge and Belgravia, for example, prices are about 16% off the peak, and in South Kensington prices are about 19% off the peak.
“In some instances, international buyers are getting a 40%-50% saving on what they would have been paying in 2014.”
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