Brickflow, the UK’s first development finance search engine, explains.
The property market was confidently looking forward to a buoyant 2020, the wrangling over Brexit was finally at an end – there is nothing the property market dislikes more than political instability and the deadlock over Brexit without being able to move either backwards or forwards amounted to just that. The Brexit debate had a sort of insidious dampening effect rather than the hallmarks of an outright political crisis but the impasse certainly it took its toll. The only thing that was certain was the uncertainty and whether you are a fan of Brexit or not, the deed is done now and so everyone can push on with the brave new world. So the forecasts were positive and whilst no-one was certain about what the growth would look like, investors and developers were optimistic for 2020.
There was much talk about reforms to stamp duty, first-time buyer relief and also spending commitments for new builds and local infrastructure to support them. Most analysts confidently expected house prices to increase by around 1.5% in 2020 and 2.3% in 2021, that might have sounded bullish but remember the facts. Over the past decade, the average UK house price has increased from £167,469 to £232,944 and this in spite of three prime ministers, the global financial crisis, four general elections and the endless Brexit saga – proof if proof were needed of how bombproof property really can be. However, it is important to look more closely at the averages as averages can hide very relevant and helpful detail.
Zoopla, always worth turning to for good and accurate data on property, broke some of these generalities down into regions which really shows how misleading averages can sometimes be. Taking 2019 as its study, Zoopla found that on average, in London for the first six months of 2019, a property fell in value by £71.23 per day. Across the regions, however, houses all rose in price and this is what the analysis showed:-
- West Midlands – +£36.58 per day
- South East – £35.32 per day
- North West – £20.39 per day
- Wales – £18,03 per day
- Yorkshire – £12.37
- North East – £6.97
For the keen student of property prices and trends, this crucially highlights the importance of taking a regional view if you are looking at property development and investment opportunities. London can have a distorting and unhelpful effect on industry data.
As well as respectable growth in UK property, developers were also eagerly awaiting Boris Johnson’s action on his promise of one million new homes by 2025 as part of the Tory party commitment to ensuring 300,000 new home are added to the property pool every year by the time we reach the mid-2020s. Is this not just the ‘same old same old’ or we have heard it all before as new housebuilding has consistently fallen below promised targets for nearly twenty years.
So, 2020 was looking as if the dial was set between fair and good with a lot of positive optimism surrounding the property market and development opportunities and then, along came the Coronavirus – if its not one thing then its’ something else!
What impact has Coronavirus had on the property market and opportunities for development?
Covid doesn’t have to sound the death knell for property and, in fact, the initial response after lockdown has been very buoyant but pundits all know that some of this is just a delayed reaction to the enforced stoppage and the market will settle down in time. Covid will end up being just another twist and turn in the world of property but there have already been some immediately identifiable trends which have emerged and which property developers should take note of.
Home working space – It’s not rocket science, many people were forced to work from home during the lockdown and some will not be reversing this trend so properties with a designated home office or study are proving popular as some people permanently change their working lifestyles. As a developer, if you building from the ground up or converting, think about this new requirement. In small properties, it is possible to combine a home working space with another function if there really is no room – it’s all about the design. If you are buying to refurbish then why not think about a roofline studio or office in the loft which all the family can use, this can easily double up as other accommodation or be changed to guest bedrooms too
Outdoor space – Covid has seen people re-evaluating how they live and where they live with more people looking to add outdoor space to their list of essential home requirements. The number of people looking for properties in London with outdoor space has exploded since the start of the Coronavirus
Lifestyle changes- people are making a bid for freedom and ditching the commute. With remote digital working, there is no need to pack into commuter hotspots, it is perfectly possible to live in a much remoter location which doesn’t have to be near an office or place of work. Money goes further as house prices are usually lower coupled with the fact that cities are perceived to have far greater disease risks due to the concentration of people
What does this mean for the property developer?
Some people will be going back to work but for many who were forced to work from home, once they got over the initial shock, the advantages have proved too attractive to turn their back on. Homeworking allows flexibility around family life, loses the wasted hours commuting either sitting in traffic on the M25 or stuck on a train somewhere not to mention the cost of travelling.
A renovation should include a room where a home office could be installed even if it is not dedicated to this purpose at the time. Estate agents report numerous enquiries for properties where there is an actual room which can be converted into a home office or there is already one present. Anyone who has tried to work from home during lockdown will know that balancing your laptop on the end of the kitchen table or trying to squeeze into a quiet corner of the living room just doesn’t work.
A clever renovation will feature a dedicated home office which can be quickly transformed into a bedroom or a sitting room. If the house is small with not much garden why not consider a loft conversion? This can open skyline space with a modern, contemporary vibe ideal for a bright open plan workspace or studio and so easy to convert into a bedroom if things change. A garage conversion or outbuilding in the garden is another option, the key is flexible accommodation and understanding your target market.
Outdoor space has shifted sharply into focus after the challenges of lockdown, those who lacked a garden or balcony are seriously reconsidering their living arrangements. Always aim the outdoor space at your target buyer; most people don’t want high maintenance gardens, they want all the joy and pleasure of a garden without the work.
Households not now committed to a daily commute will search further afield for property which may be different, bigger, cheaper or all three. An occasional or weekly commute to the office is not going to be a problem with a long journey and so the density in some areas may shift out into the green belt and the countryside; working from home means you can live where you like, it is one of the biggest ties to location apart from schools and transport links.
With more people now walking and cycling in both urban and rural areas, the use of a car has been called into question. Being outside in the fresh air and getting to work or anywhere else under your own power is better for your health for a number of reasons and certainly more advantageous for your pocket. So perhaps the double garage and wide driveway may start to become a thing of the past, another lifestyle change due to Covid. Parking has often been a premium issue for the house hunter but this may well begin to change and could be a lot further down the list of priorities than it used to be. Conversely, don’t forget the uptake on electric vehicles and one of the biggest challenges for these is access to charging points. Expect to see a big push from the car industry to meet the government’s stated target of no petrol or diesel vehicles by 2035. New homes in the UK have to have car charging points by law but don’t overlook older terraced properties which are where the challenges really lie.
Property will always be a good medium to long-term investment, history demonstrates this time and time again. But to stay ahead of the curve as a developer is to understand a changing market. Green used to be the big buzzword, it still is but now Covid has shifted the goalposts again in terms of what buyers are looking for in a new home.