As I write this the country appears to be in mass confusion over Coronavirus. Curfews, local lockdowns, the rule of 6, work, don’t work, etc. Regardless of your opinion about the virus and how it’s being handled, it has wreaked economic and social havoc. And it’s likely it’s going to be with us for some time to come. The new normal. The overall consequences come at a high price.
As far as the residential property market goes, one thing that does seem certain – the new normal: ‘out is in’. The media has been awash with reports about the race for space. Working from home is asserting itself and the prospect of commuting further becomes less sour provided it’s swallowed less often. I find commuting a necessary evil I’d rather do without, and working from home more has greatly improved my “work-life-balance”.
Rentals as well as sales
That phenomenon paradigm shift has hit the residential sales market first. But in recent weeks it seems that its permeated into rentals too. City rental rates are taking a battering from the double whammy of emigres and the absence of overseas students. Meanwhile, out-of-town rentals continue to rise.
But then over the weekend I read a report about how, in spite of everything, it’s been a busy summer in the UK staycation sector. This largely due to overseas travel restrictions leading to Brits looking for a break closer to home.
The Guild of Property Professionals report detailed that around 1 in 25 households owns a 2nd home in the UK. That’s a lot of 2nd homes – 1 million, give or take. The same research suggests large numbers of those polled (up to 45% in the case of 35-44 year olds) are considering purchasing a 2nd home. That makes the sustained post-Covid surge in property prices experienced in 10 of the 12 regions even easier to understand. And all this during the holiday season that typically dampens market performance.
Clearly – OUT IS IN
I see two elements at play here. Not only does the 2nd home provide a refuge from the city, it also looks an increasingly sound buy-to-let investment. And with the purchase costs on 2nd properties currently equating to around half what it was pre the recently-announced SDLT holiday, if you can afford it, it seems that now is the time to buy.
All that said, over the coming months demand looks set to soar in local housing markets. I’ve commented previously on the likely implications for supply and pricing in these new property ‘hotspots’ and the role a specialist property development loan must play to help developers step up to the plate. The focus needs to be on future-proof, high-quality housing. Housing within the reach of those needing to get onto the ladder.
SME developers with proven footprints and strong local connections are set to play an even more important role in housing provision. What will continue to matter is homes that are built better, have more flexibility, and play into the work life balance thematic.
I’m pleased to say that at Hilltop we are seeing an increasing number of attractive developments by reputable sponsors landing on our desks. In light of recent market data and our own analytics we’re more confident than ever that projects ‘in the regions’ represent compelling propositions to fund.