The English housing market reopened for business on 13 May after its temporary closure since mid-March due to COVID-19.
If a report is to be believed, about 400,000 property transactions were stalled due to the sudden shut down between March and May. Now that the lockdown is partially lifted in England, buyer visits and physical moves have started taking place.
So, what will this mean for first time buyers in the UK? Let’s find out.
The Pent-Up Demand
It is expected that the reopening of the market will lead to a rise in consumerism. According to a prediction made before the lockdown was eased by Knight Frank, an estate agent, the home sales in the UK in 2020 will decline by 526,000, amounting to a fall of 38% compared to the 2019 transaction levels.
We expect that the demand will rise after the period of reduced spending.
Buyers’ Requirements Will Likely Change
Experts believe that first-time buyers will have a changed-set of real estate requirements – in terms of the area they want to settle in, and all the qualities they look for in a property. Savills, a real estate agent, surveyed around 700 buyers and sellers in April to understand the changing requirements.
It was found that buyers are now looking for greater space, especially the ones who anticipate working from home with children. Additionally, more people are likely to choose a village location. It was further revealed that green space has become a priority for urban buyers.
That said, North West has always been relatively affordable for first-time buyers, and with cities like Blackpool, Trafford, Stockport, Liverpool, Knowsley, and others becoming popular – it would be great to see how things unfold.
A 2019 study by Post Office Money founded that first time buyers who purchased the homes in Stockport in 2018 witnessed the largest return on investment in the region in 2019, so much that house prices have jumped by 10% in 2019. But this was in 2019, today, keeping the changed working requirements and perception towards life into consideration, it is expected that the rural areas and suburbs will likely become the hot favorites of first-time buyers.
The first-time buyers in the South East and London are looking for affordable options. While it is expected that the pandemic will lead to a fall in house prices, they will remain unaffordable for young people, especially the ones with lower incomes in London.
Talking about the first time buyers in the North West, a report revealed a 10% jump in the Stockport home prices between 2018 and 2019, however, 31% of the region of the city remains highly affordable. Trafford in Greater Manchester, though, might not fill the bill of the first time buyers.
As of 2019, the average property is the region was priced at £156,854. That’s not bad considering that an average first-time-buyer-household earns £40,053. Not to forget, one can easily find low-priced properties, for as low as £70,000 in Blackpool, another highly affordable area for first-time buyers.
We believe that first time house buyers could find some really hot deals in the current scenario when most sellers are struggling with a cash crunch and the economy is still taking its time to restart. That said, once the normalcy returns and industries start running, it is expected that the housing market will be back with the bang.
The pent-up demand might also contribute to its rapid growth, but yes, rural areas and suburbs will still prove to be the affordable options compared to their counterparts.
According to a Savills survey, 30% of Londoners are more likely to move to the countryside or village location. On the same line, Rightmove, also noted a similar trend as the searches related to moving outside the city soared high to 51% of inquiries compared to 42% this time last year.
This is all because of the new rules and regulations that are rolled out by the government. Although the government has promised an easy way out of lockdown, it is obvious that social distancing in offices and public transport would likely remain in place.
Most companies are now asking employees to work from home to maintain social distancing and reduce costs. Office space per person is very expensive in London, with the average monthly cost per person ranging anywhere between £650 and £1,500. And this was way back in 2018. It must be much higher today.
As a result, people don’t have any reason to stay in the capital. Working from home is not only affordable, both for employers and employees, but it also helps employees lead a healthier lifestyle. This shift in sentiment is encouraging first-time buyers to buy real estate properties in rural areas.
It would be safe to assume that buyers will find respite in countryside areas where homes are priced around 20% below the other areas. Savills highlighted various others that are witnessing an urgent demand – Winchester (Hampshire), Newbury (Berkshire), and Canford Cliffs (Dorset).
Cheshire in the North West and Devon in the South West are expected to emerge as other high-demand areas. Winchester and Newbury are new favourites as they are situated close to London, and people can transition between the two areas within an hour.
Outdoor Space Is The New Requirement
While buyers have their own set of requirements while looking for a first time home, trading off a balcony for another bedroom, for instance. It seems that having an outdoor space in some sort or the other has now made it to the checklist.
Savills survey revealed that more and more first time buyers are now asking for an open space, especially those aged 40 or younger.
So, Will The House Prices Soar High Or Drop Down?
According to most mortgage brokers, there will be two possible scenarios, depending on the extent of pandemic and how long it takes the normalcy to return. If the lock down lasts longer, the average house price could lose 10%, and if things started getting better, prices could fall to about 5% this year.
As of now, we expect that sellers are not feeling forced to sell or reduce their asking prices. If more and more people start migrating out from high-demand areas in the next years, it will reduce the pressure on supply, and make houses more affordable for first-time buyers.
That said, it is predicted that the real estate market will experience a strong recovery by 2022, and could grow at a rate of around 15% over the next 5 years.
All we can do is wait and see how things shape themselves, but as for now, the increased craze of first-time buyers towards countryside properties seems to be real.