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The “race for space” that became characteristic of the property market during the Covid pandemic could be starting to slow, according to Halifax.

PUBLISHED BY THE GAURDIAN ON LINE 7TH DECEMBER 2021

 https://www.theguardian.com/business/2021/dec/07/race-for-space-could-be-over-as-flat-prices-rise-more-than-houses

As people shunned city centre work and life during lockdowns, and the government introduced a stamp duty holiday, demand for country living – or at least a spare room – grew.

But in its latest snapshot of the housing market, the mortgage lender said there were signs this trend could be fading. Growth in the price of flats was now outpacing growth in the price of detached houses, which were in high demand during lockdown.

In November, flats were changing hands for 10.8% more than at the same time last year, while detached houses were typically fetching 6.6% more.

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The percentage difference does not tell the whole story: according to Halifax, the average price of a flat that it agreed a mortgage on in November was £118,771, up from £107,159 last year, while the average detached house costs £517,650, compared with £485,684 in 2020. So a much smaller cash-price rise comes through as a bigger percentage at the lower end of the market.

But there are reasons why demand may have tipped in favour of flats. For months the housing market boomed on the back of sales of larger properties, with commentators reporting that lifestyle changes prompted by the pandemic were fuelling demand for homes with gardens, studies and spare rooms as more people worked from home.

These were also the properties where buyers had most to gain from stamp duty holidays launched after the first lockdown. In England and Northern Ireland, until the end of June homes costing up to £500,000 could change hands with no tax to be paid.

Buyers paying more than that for a property could save £15,000 in duty – enough to persuade many to bring forward purchases, or to look in a slightly higher price bracket than they might have otherwise.

The withdrawal of the stamp duty break, which was phased out over the summer and ended on 30 September, plus the reopening of some city centre offices, could have tipped demand towards flats.

There is evidence of an increase in demand from buyers. According to the property website Rightmove, in November last year detached homes were the most searched for, but last month flats took over.

“A shift in demand from bigger houses to flats has emerged as more of society has opened up again and people have assessed where they will work throughout the week, with many now considering a move closer to a city than further out, Rightmove’s property data expert, Tim Bannister, said.

“Prospective buyers looking for a flat, with a must-have for many of them now being a shared garden or balcony, will find there’s more availability than other property types and lower average asking price growth over the last year, but there’s now more competition.”

Jeremy Leaf, a north London estate agent and former residential chair of the Royal Institution of Chartered Surveyors, said his agency was still receiving multiple offers for any three- and four-bedroom family houses.

 
“Flats are making a bit of a comeback now that post-furlough working and commuting patterns have been formalised for many, at least in the medium-term,” he said.

Sarah Coles, a personal finance analyst at the advice firm Hargreaves Lansdown, said the market in flats may not purely be driven by those taking early steps on the housing ladder.

She said industry figures showed the sums of money people were withdrawing when they remortgaged had been rising, and that on average those who remortgaged to free cash for reasons other than debt consolidation or home improvement took an average of £80,000. “There’s a strong chance that an awful lot of this is funding another property,” she said.

“When we think of second homes we might usually think of a cottage by the sea or in the countryside, but the pandemic has changed the way we live, and may well be affecting second home trends too. The growth of flexible and hybrid working means it makes more sense to buy a home where we really want to live, and a small place near work for when we absolutely have to go into the office.”
However, with soaring inflation and further rate rises expected in 2022, the cheap mortgage deals that have boosted the housing market in 2021 are likely to be more difficult to find.

“Nevertheless, interest rates will remain low by historic standards and property prices will continue to be supported by the limited supply of available properties,” Galley said. “However, it is prudent to highlight the potential for house prices to rise or fall by much greater margins next year, depending on how Covid-19 and its variants continue to impact the economic environment and the potential for any further policy interventions.”

Despite the potential cooling of two years of house price growth, there are fears first-time buyers will continue to be priced out of the UK market.

“The news that house prices [could] continue to rise is particularly concerning for first-time buyers, a group who have struggled with rising house prices for decades,” said Sophia Guy-White, a co-founder of Generation Home, which specialises in mortgages for first-time buyers. “And although this demand seems to be cooling, there remain too few homes to buy and too many buyers locked out"

Abbey Independent Inventories can assist with your inventories, check-ins, check-outs and interim inspections in Oxfordshire and surrounding counties. Please call Julie on 01235 797250 to discuss any requirements you may have

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