It took a trip to the Land of Oz to make Dorothy value her home. For the rest of us, it took a global pandemic. During the past two months, our residence — whether that be a mortgage-free house or shared rental flat — has become our entire world: office, restaurant, cinema, gym and shelter, all rolled into one. If we didn’t know the ins and outs of our quarters before, we do now. Many people have developed a more personal understanding of a market that has played a vital role in shaping the British economy for decades.
Housing costs in Britain are some of the highest in the world, more than quadrupling since the 1970s. Failure to increase the UK’s housing stock over the years has made the market increasingly inaccessible to those not supported by the Bank of Mum and Dad, especially in London, where the average home carries one of the heftiest price tags in the world.
Still, demand is high. It’s no surprise England’s housing market has been released from lockdown before many other industries — it’s crucial to getting the economy moving again. At least £82 billion worth of property sales were frozen when the UK formally went into lockdown in March; more than 400,000 buyers had their purchases put on hold. It would be quite a stretch to define estate agents as ‘key workers’ alongside doctors and nurses, but they have been among the first people allowed back to work, even though a major part of their job involves entering people’s homes.
While the role of the housing sector is remarkably different in the Covid crisis than it was during the 2008/9 financial crash, it may prove equally important. A burst housing bubble accounted for roughly a third of the total fall in UK GDP at the height of the crash. We don’t yet know what hit today’s market will take, but estimates range from prices barely budging to a fall of more than 15 per cent in the value of homes. In the United States, sales are down, but some early signs suggest prices have marginally increased: the huge drop in demand has been matched by a slump in supply, as only those in the most untenable circumstances would dare to put their house on the market right now. The UK could mirror the US — as one of the most undersupplied countries in Europe, even the most surreal crash might fail to produce enough available homes to balance out the huge demand.
But early indicators suggest not. Last week when the government gave the green light for England to reopen the housing market, there was an immediate flood of homes posted online. Properties from Marylebone to Plymouth have seen their asking prices slashed. This dip is going to be followed by the biggest economic contraction of our lifetimes, possibly of the century, which will almost certainly mean another blow to the sector. Even the Bank of England — which has been bullishly optimistic about the UK’s overall economic recovery — has forecasted a 16 per cent dip in house prices due to the virus.
A slump isn’t likely to be permanent, but the question, when the market rebounds, is what kind of rebalancing — if any — takes place between urban and rural areas, houses and flats, or different regions throughout the UK, as people reassess what features they value in their home.
Londoners, who once based their decisions on being at the centre of the action, now find themselves cooped up in small flats. In the past, the idea of leaving a big city would be off-putting to those who wanted easy access to restaurants, theatres and a vibrant night life. But as social distancing puts the future of many of these things up in the air, the value of a private garden is rising. Meanwhile, changes in attitudes to home-working means this is now a more realistic option for many. A trend towards suburban properties could be coming. ‘London still holds its romantic appeal,’ a hopeful second-time buyer tells me, ‘but it’s losing its practical one.’
The benefit of living close to work evaporates when your new workplace doesn’t require a commute at all. Some big companies, including Google and Facebook, have told employees not to expect to come back into the office before the end of the year. Twitter has given its staff the option to work from home indefinitely. Retail and hospitality sectors won’t be able to offer such widespread flexible working, but all companies will >be staggering employees’ returns to take into account social distancing measures. And while the majority of people working from home are expected to return to the office at some point, it’s not yet clear if this will mean the same working pattern as before the lockdown: regular commuting hours, five days a week.
Living with Covid isn’t simply a health and safety consideration, but a new factor in calculating one’s quality of life. If there is another lockdown, where will you be when it comes? For the lucky ones, the answer might be a second home by the sea or nestled away in the countryside, but the benefits there are also waning now precedent has been set that it can’t necessarily be used as a safe haven when a crisis like Covid hits. The incentives now lean towards making your primary home lockdown-friendly — by adding an extension or purchasing a second freezer, as many did in the brief stockpiling panic. It may not be ideal, but it stays within the rules. And on the plus side, there’s no risk of receiving a frosty response from locals upon arrival.
The real risk to the housing market isn’t that it radically changes during this recession, but that when we come out the other side, it returns to being largely the same: a heavily undersupplied, restrictive sector that makes it extremely difficult for average earners to get on the housing ladder in urban areas. The government already views a functioning housing market as necessary to kickstarting the economy again; now is the time to see it as the key to transforming it, too. A report last year from London Yimby in conjunction with the Adam Smith Institute estimated that the UK could boost its GDP per capita by 30 per cent if enough homes were built in the right areas, where people want to live. As the Treasury searches for ways to pay down the countless billion pounds of debt racked up by emergency Covid measures, liberalising the planning system and building more homes is a surefire way to get the economy growing again.
Before Covid, many will have shared in the sentiment ‘there’s no place like home’. Now, every new buyer and renter will be thinking ‘there’s no place but home’. This will undoubtedly influence the market, but for a sector so overdue for a shake-up, it could prove a useful shift. Lockdown or not, people all over Britain should be able to aspire to live in homes that meet their wants and needs, not constantly made to reach for what’s in limited supply.