London housing market booms, while demand for flats fall short

November 13, 2020 / Isla MacFarlane
London housing market booms, while demand for flats fall short

With the pandemic fuelling a search for space, major cities are suffering while rural areas become more popular; David Hannah, Founder of SDLT specialists, Cornerstone Tax, discusses what this means for the London property market.

Since reopening in May, the UK property market has experienced a “mini boom,” spurred on by the stamp duty holiday introduced by the Chancellor in July. According to Halifax bank, by October, the average property price was up 7.5 per cent year-on-year, hitting a new record high.

However, this has not impacted every area of the market in the same way, with the pandemic causing an increasing number of buyers to shun flats. In London, the average price of a flat went up by more than any other property type between 2011 and 2019. This trend has reversed over the past 12 months, and flats have been the weakest performers.

Estate agents Hamptons International, claim that London flats are taking 70 days to sell on average (when they sell at all), whereas houses are taking just 29 days. Separate analysis by PropCast, which maps the housing market, reveals that only 27 per cent of all flats listed for sale are finding buyers, compared with 44 per cent of houses.

This is in large part due to a renewed desire for more space, and ideally, outdoor space. Being placed into a national lockdown once again, and the prospect of further lockdowns being introduced in the future, is strongly weighing on homebuyers minds. Buyers are now prioritising having a property with enough space to fit in a home office, and also placing more importance on having access to outdoor spaces.

A survey conducted by PwC into working habits and home moving plans before and after lockdown, found that over a third of 45-64-year-olds living in the capital “expect to move to a different region outside of London next time they move.” This is a 16% increase compared to pre-Covid.

David Hannah, Founder of Stamp Duty Land Tax specialists, Cornerstone Tax, said: “The Coronavirus pandemic and stamp duty holidays have accelerated a process of de-metropolitanization of global cities in the 21st century. Being in a city such as London but not enjoying its benefits during lockdown, an increase of working from home and less time in city-based offices will have promoted other properties on the commuter belt.

“The threat of the current lockdown being extended, and even further lockdowns being introduced next year, adds to the thinking that this kind of thing is here to stay for the foreseeable future. This has made people think even more seriously about whether they want to remain living in a city, known for a lack of space, both indoors and outdoors. When you are spending all your time there, it increasingly becomes more of an issue.

“Eventually, prices will fall in cities and rise on the commuter belt and in the countryside, in a market shift of what the market has done over the last decade. While this may have been accelerated by the Chancellor’s stamp duty holiday, it is not the sole reason for this mass exodus.

“When moving out of cities, it is important to understand the different implications of stamp duty including annexes and commercial use of land. These are important and can catch some people out if they do not fully understand the other rules that affect these types of dwellings in more rural locations.”

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