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Category: March-April 2022
A man and woman on a construction site

Common Construction Myths

Sarah Dunn Whether we like to admit it, we all have unconscious biases. But could these misconceptions be stopping women from entering construction? We thought we’d break down some common […]
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Sold sign outside a Property

Market Pulse Round Up March/April 2022

Record monthly increase in property prices

Despite the ongoing rise in the cost of living, looming increases in energy bills, and uncertainty across financial markets, the price of property in the UK continues to rise.

At least that’s what the findings from property portal Rightmove’s House Price Index shows. February saw growth at 2.3%, which amounts to around £7,800, and it looks like property prices in March could follow suit.

Average home nudging £350,000 mark

According to Nationwide’s latest UK House Price Index, property is now around 20% more expensive than it was before the pandemic. It found that the average house price in the UK has increased in value by nearly £30,000 since February last year and more than £44,000 than in the same month in 2020. That makes houses more than 6.5 times the average UK 
take-home pay.

This growth in property price was the largest monthly increase since 2001, which is when Rightmove began recording its data. This works out as an annual increase of 9.5% over the past two decades.

Based on asking prices from 13,000 estate agencies around the UK, the survey’s figures show the cost of the average home in Britain is 
now £348,800.

A look back at property values in London over the past two years, since the UK first locked down in March 2020, shows an average increase of £40,000 for homes in the capital.

Analysts blame the shortage of available stock across the UK for pushing prices up, alongside low mortgage interest rates (the Bank of England raised them from 0.1 to 0.25% at the end of last year).

Samuel Tombs of economic research consultancy Pantheon macroeconomics predicts interest on the typical two-year fixed mortgage rate is expected to double in June in comparison with September 2021. This, the economist insisted, will slow down any rising property growth.

Renters paying more for city living

But it’s not just buyers who are paying more for a new roof over their heads. According to recent findings by property portal Zoopla, 
city-centre rents are up by £62 per month compared with pre-pandemic amounts, and it’s even tougher in London. According to Rightmove, the average monthly rent in the capital has hit a new record high of £2,142.

However, Zoopla’s statistics also showed that demand for rental accommodation was up by as much as 76% at the start of the year, compared with the same period between 2018 and 2021. As people start returning to city centres, we’re once again seeing a growing interest in major cities, such as London, Manchester, Birmingham, Leeds 
and Edinburgh.

Grainne Gilmore, head of research at Zoopla, said: “The flooding of rental demand back into city centres thanks to office workers, students and international demand returning to cities means the post-pandemic recalibration of the rental market is well underway.”

Increase in companies looking to lease office space

Meanwhile, the demand for office space is also increasing as companies try and tempt their staff back to city-centre working.

An earlier report by Rightmove that centred on commercial property reported an increase in business owners looking to lease office space. Whilst its unsurprising demand between 2022 and January 2021 has seen a 54% jump, what is striking is that interest in commercial leasing this quarter is 15% greater than this time in 2019.

Inflation still to make its mark on property market

Nationwide’s chief economist, Robert Gardner, commented that he was surprised inflation hadn’t appeared to hit the property market yet.

“The continued buoyancy of the housing market is a little surprising, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months,” he said.

“The strength is particularly noteworthy since the squeeze on household incomes has led to a significant weakening of consumer confidence.”

Property prices to drop after summer

However, business analysts warn, a fall in house prices is likely towards the latter half of the year with some suggesting they could drop by as much as a tenth in a year. Those most likely to be affected are those who overstretched in order to meet the stamp duty deadline, together with first-time buyers (for the same reason).

Karl Thompson, of think tank the Centre for Economics and Business Research, predicts a drop of 1.5% every three months from September onwards. That’s then expected to fall 1% every year for the foreseeable future.

Andrew Wishart, of economic research consultancy Capital Economics, was more optimistic, and he predicted property prices would “stagnate rather than collapse in 2023”.

Ukraine crisis contributing to higher UK living costs

When it comes to the cost of living, the war in Ukraine has had an impact on petrol and fuel costs across Europe. Many economists warn that, in turn, the Bank of England could consider raising interest rates later this year. National insurance payments will increase by 1.25% in April whilst, around the same time, energy bills are due to rise by around 54%. Utility bills may even double again towards the end of the year, costing the average UK household around £3,000 per year.

Build to rent (BTR) more popular up north

Build to rent just seems to be getting bigger and bigger – both in terms of its reach across the UK housing market and its popularity.

The British Property Federation (BPF) recently revealed that construction began on more than 13,500 BTR homes in regional cities last year – triple the amount of provision in London (where the sector first started).

Ian Fletcher, Director of Policy at the BPF, recognised the huge rise of the BTR sector in northern towns and cities, acknowledging that it went hand-in-hand with regeneration initiatives.

“[Build to rent] is not just about increasing housing provision, it is also a major economic driver,” he said. “It helps attract and retain skilled workers, serving as a catalyst for urban regeneration.

“The strong growth of the BTR sector across the regions will support the government’s levelling up initiative and help revitalise town and city centres”.

At the same time, Savills are convinced the BTR sector will double within the next few years. The estate agency is confident of their prediction because they’ve already seen many local authorities push through planning consent for BTR developments, in the knowledge their own housing stock is diminishing or already diminished.

Research from estate agency Ascend Properties revealed that planning permission requests for build-to-rent units were up by as much as 52% during 2020 – the most intense period of the pandemic.

This rapid growth means the demand for BTR is growing too. Many young professionals can’t afford to become homeowners. Understandably, they also enjoy the inbuilt benefits of BTR complexes, such as gyms, pools, workspaces and cinema rooms. Some complexes even come with concierges and domestic cleaning and laundry facilities.

According to research carried out by the insurer Admiral, there are almost twice as many people in the UK looking to rent one of these new BTR properties as there is accommodation. In Salford, this increases to a whopping 10 people for every one unit.

One new BTR facility on Liverpool’s quayside even has its own “Zoom room”. Those renting at the former HMRC office block now redesigned and renamed The Keel can look their best on-screen thanks to the room’s tinted windows and flattering lighting.

In another BTR development in northwest London, renters can choose to work from a retro camper van. And when the novelty of a camper wears off, residents can also enjoy a cinema room, all while only paying £1,770 a month rent, plus utility bills of around £200/month.

Property advisers CBRE calculated that a record £4.1bn was invested in the sector last year, while BPF figures show there are 26% more BTR units across the UK than in 2020.

Another 141,215 BTR developments are currently being built, or are in the pipeline; Birmingham, Sheffield, Manchester and Liverpool have seen the biggest jump in provisions of BTR properties.

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