Accelerated housing market price growth as people are returning to cities

Category: property market

Halifax reported that house price inflation has been highly stimulated by the increased demand for properties in cities where prices have gone up significantly, compared to surrounding areas.

The pandemic affected the lifestyle of many individuals, resulting in soaring demand for properties in suburban and rural areas, since people were looking for more outdoor and indoor living space.

Comparatively, property demand in urban areas decreased, due to the lack of access to green spaces such as private gardens, and other amenities that are advantageous to suburban and rural homeowners. These amenities were in high demand, due to the restrictive living conditions at the time.

Nevertheless, since early 2022, people have started to come back to cities as most businesses fully reopened, and people began to return to offices. The increased demand resulted in urban property price growth – of up to 9.2%.

Changing priorities

According to Halifax, there is a shifting trend in terms of what kind of properties people look to purchase, stating that homebuyers’ priorities are changing dramatically in post-pandemic world.

A Halifax representative stated:

“The pandemic transformed the UK housing market. Homeowners wanted bigger homes and better access to green spaces, fuelling huge demand for larger properties away from urban centres. This accelerated house price growth in the suburbs and more rural areas, while in cities it was much slower.

“That trend didn’t disappear completely this year, as house price growth in these areas remained strong. But, as daily life started to get back to normal for many, the opportunity to live in cities became more attractive again, driving up demand. There’s evidence of this in locations across the country, with property price inflation in the majority of cities outstripping increases in their surrounding areas.

“Clearly the economic environment has changed considerably in the last few months, with the likelihood of more significant downward pressure on house prices, as the cost of living squeeze and higher borrowing costs limit demand. The extent to which such trends will continue to shape the housing market is therefore uncertain.”

House price growth

In cities, such as Liverpool and Manchester, house price growth has been much higher, compared to their surrounding areas.

It has been a relatively similar situation in Scotland – a steady rise in property prices in Edinburgh and Glasgow has been the story so far since the start of this year. Whereas their surrounding areas have not seen increases in price inflation that are as significant – notably Fife and West Dunbartonshire.

In Greater London, inner London boroughs are recording price increases of almost 7%, whilst outer boroughs are recording an increase of less than 5%. Only a small number of boroughs have seen prices fall, such as Brent – down 8.4% on average house prices.

How does this impact the landlord community?

Since the start of the year, demand for properties in cities have been on a steady incline, thus encouraging landlords to re-focus on buy to let properties that are located in urban areas.

However, the demand for properties in suburban and rural areas has not entirely diminished. Quite the contrary, since people’s priorities have been shifting, these areas have seen solid growth.

Therefore, it could be a great option for landlords to diversify their portfolio and invest in properties, situated outside towns and cities that may be better value for money, compared to properties located in urban areas.

Since the Covid-19 pandemic, the public’s perception and, most importantly, priorities have started to change regarding their living location and required amenities, thus providing an opportunity for landlords to invest in a wider range of properties, located in varied locations