Country houses for sale

Property Talk: Has property’s great ‘race for space’ gone into reverse?

The latest moves in the property market suggest that city/life — but ther eareLatest data suggest that Annabel Dixon takes a look at the latest in the markets.

It’s three years since Coronavirus took hold in spring 2020. During that time, you can’t have missed the ‘race for space’ stories of people trading homes in towns and cities for bigger properties in rural and coastal areas. Buyer demand pushed up house prices particularly in the likes of the South West, Wales, Kent and Norfolk. This Halifax data in the Daily Telegraph gives a flavour of the knock-on effect that working from home had on seaside properties.

But as the memories of lockdown fade and affordability pressures bite, evidence suggests that key pandemic-led trends in the housing market are being turned upside down.

Buyers shifting attention to flats — just as buy-to-let investors are selling up

Unsurprisingly, houses with plenty of space were hot property during the pandemic. But against a backdrop of higher mortgage rates, buyer demand is moving to flats, according to stats from Zoopla. Some 27% of buyers eyed one and two-bedroom flats in January – up 5% from a year ago. In contrast, demand for three-bedroom houses dropped 5% to 39% (although they are still the most sought-after type of home in the UK).

‘This is all part of the shift back towards cities and better value-for-money homes in accessible and more affordable suburbs,’ Zoopla says. ‘It also reflects the fact that a proportion of existing homeowners may be holding back until the outlook becomes clearer.’

With the cost of living at the forefront of many people’s minds, it’s not hard to see why flats — generally cheaper to run — might make something of a comeback. In Knight Frank’s sentiment survey, 35% of buyers cited increasing energy costs as the biggest influence when buying an energy-efficient home.

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Flats have also seen slower house price growth, making them an appealing option for struggling buyers. Just take a look at Nationwide’s data: the value of the average flat increased by 13.4% between the start of 2020 and the end of 2022. Meanwhile, the price of a detached property shot up by 26% over the same time spell.

The good news for buyers is that there may be plenty of flats to choose from. The Financial Times ran an in-depth piece last week asking ‘Is this the start of a great buy-to-let sell-off?’, with the paper’s analysis of HM Revenue & Customs data showing that the pace of buy-to-let sales has picked up over the past year. ‘Regulation and tax changes have fundamentally changed the economics of investing in the sector,’ one landlord told the paper, explaining his reasons for offloading his portfolio. ‘I know many other landlords doing the same.’

Lucian Cook of Savills added to the FT it’s the more casual entrants to the business who will think twice. ‘You’ll be left with a core of committed landlords who run it as a professional business. But a lot of people for whom the investment has become more marginal will be taking a second look at it.’

Buyers are heading back to the bright city lights

The flight to rural and coastal areas has calmed down completely, with buyer interest in affordable, accessible urban areas ‘holding up much better’, says Zoopla. The property portal points to the likes of Bradford, Swindon, Coventry, Crewe, Southend and Milton Keynes, which are all recording above-average demand for homes.

There have been clues before that the pandemic-led trend for escaping to the countryside was fading, as we’ve highlighted in Property Talk. And recent Rightmove data reveals that searches for London in 2022 increased by 9% compared with the year before, while searches for Cornwall and Devon dropped by 18% and 17% respectively.

The race for space has left permanent change

So cities are busier, people want to buy flats again and the heat has come out of the red-hot rural markets. But are things back to where they were in late 2019? Not quite, according to Dominic Agace, chief executive of Winkworth,  who says the picture will never return to what it was back then. ‘The surge to the country has abated and we’re moving to a more normalised situation,’  Agace told The Property Exchange podcast. ‘Prices have grown far faster in some of these [rural] markets than they have in London and I think some of that will come off but you’ll still be well above where we were before the pandemic.’

And while city living has been revived by the return of workers to offices, life hasn’t snapped back to pre-Covid norms. Recent research reported on the BBC shows that the typical week in the office is now Tuesday to Thursday, suggesting that there could still be scope to put down roots further afield.