The “race for space” that began during the Covid-19 epidemic may have crested, but the house price increase is still on the rise.
A two-bedroom garden apartment in north London, with a reference price of £950,000, was sold in less than a week. It’s in a mixed-use neighbourhood on the borders of Islington and Camden, with a spacious patio, garden, wood floors, and underfloor heating.
“We’ve been inundated with people wanting to see it,” says Andrew Groocock, a regional partner at estate agents Knight Frank, who helped organize 23 viewings. “It ticks the boxes of exactly what’s hot in the market at the moment. It’s still an incredibly buoyant market. The last two years have been remarkable.”
Inflation in the United Kingdom has reached a 40-year high of 9%. Meanwhile, the cost of living issue is deepening as food and energy expenses skyrocket while real earnings decline, and UK interest rates are on the rise — yet the property market is booming.
There has been an increase in demand for larger residences with a garden as a result of the rise in the number of individuals who work from home. People who don’t have to go to the workplace every day are willing to drive farther, according to Andrew Perratt, national head of rival estate company Savills, who argues commuter belts surrounding large cities remain property hotspots.
In March 2022, the Average Price of a Home in the United Kingdom was £278,000
As a result, many houses are snatched up within a week or two, while new sellers have to wait longer to put their homes on the market, estate agents say.
In a desperate attempt to make a purchase, purchasers write personal letters with photos of their children and dogs to sellers, describing themselves and their families.
Stowhill Estates’ Lucy Joerin claims that big family houses that took six to nine months to sell before the epidemic now sell within two or three weeks, with one going under offer only four days after it was announced.
“It’s not always the highest offer,” she says. “A lot of our buyers are putting together CVs, almost like a pitch to sellers … A key thing is that families are going to participate in village life.” She recounts that two buyers who were successful in recent days made a “lifestyle pitch” – sending letters about their families, with photos and promises that the children would go to local schools.
According to north London estate agent Jeremy Leaf, he pushed personal messages through the door of a specific property 30 years ago when he was interested in purchasing it.
“Why not?” he says. “Do whatever you can to get a property, particularly when it’s in such short supply and you want a particular road or catchment area.”
Dulwich, an affluent area in south London, has recently seen several big family houses on the market go for £1.2 million to £2 million and sold “far over the reference price,” according to Groocock. The three-bedroom property, marketed at £1.5 million, had 47 viewings and 23 offers, while the five-bedroom house, listed at £2 million, had 46 viewings and 29 offers in the first week on the market. Some prefer sealed bids when all bidders simultaneously submit their offers to the agency without knowing what their competitors are willing to pay.
Several Middle Eastern buyers are returning to Kensington and Notting Hill for the first time since the Covid epidemic hit, with several appointments scheduled over the next two weeks. The commotion may go down quickly. Some worry that the housing market will collapse due to growing prices and rising interest rates as the Bank of England tries to control inflation. However, others feel that a crash may be prevented.
“There are more jobs, more openings than jobless individuals, so it will give people confidence that they can fulfil their duties in terms of repayments,” says Leaf of this week’s labour market figures.
There Has Been an Increase in UK Property Prices to 8.5 Times Annual Wages
The triple combination of rising rents, rising energy costs, and rising food costs will make it increasingly difficult for renters to make ends meet. Tenants are suffering the full impact of increased expenses, with fees rising at the quickest rate ever recorded, according to the property website Rightmove, with monthly rates 40% more than 10 years ago.
Those who were able to purchase their own houses fared better than those who couldn’t. Even though the Bank of England began raising its base rate in December and it has already increased from a three-year low of 0.1% to 1% this month and more increases are predicted shortly, brokers maintain that mortgages remain affordable historically.
According to Leaf, the rate at which the housing market slows will be determined by the Bank of England’s willingness to boost borrowing rates. “A correction is less likely this time as interest rates are lower so debts are relatively more manageable, though it is still very difficult of course for some amid a cost of living crisis.”
Forensic Property Finance’s managing director, Jonathan Harris, says: “The market will probably plateau for a while. We will see steady rises in interest rates, not massive hikes.”
Many people’s monthly mortgage payments haven’t been impacted yet, since three-quarters of borrowers have fixed-rate mortgages. Brokers report an increase in interest in fixed-rate mortgages of seven or ten years among those looking to purchase a home.
“Fixed rates have been the product of choice for some time now,” says David Hollingworth at L&C Mortgages. People can fix their mortgages for five or 10 years at a similar rate, at just under 2.5%. The situation is volatile, with lenders advertising and then pulling rates weekly.
But Leaf says the outlook is better than in 2008 when the market crashed and some properties lost 50% of their value. “Repayments, interest rates have been so low, and even those who are suffering, hopefully, they won’t be repossessed and they won’t get into huge debts, as some people did previously,” he says. “It’s different from last time.”