Spectator Life

On the day the Office for National Statistics announced a sharp rise in consumer price inflation, albeit to a still modest 1.5 per cent, we discovered that house prices have jumped by a staggering 10.2 per cent in the last year. The average house in England now costs £275,000, close to ten times the average annual income. In 1992, the average house cost three times the average income. A housing boom during a pandemic in the wake of the deepest recession in 300 years doesn’t make a lot of sense, but a few recent events can partially explain it. After three lockdowns, there is pent-up demand, including for houses. The abrupt shift to working from home has led to a permanent change in how some people do their jobs.

Did we end up learning anything from the 2008/09 financial crisis? If we did, we seem to have forgotten it pretty quickly again, to judge by the re-emergence of the 95 per cent mortgage. Numerous deals have been launched over the past week, with interest rates of around four per cent – the result of the Chancellor’s Budget initiative for the government to underwrite such loans. If you can sum up what went wrong in the late 2000s in one sentence it is that in their determination to grow their share of the mortgage market, banks overlooked that fact that it takes very little to turn a secured loan into an unsecured one.

If there is one thing I have learnt from working in the property market for over 40 years it's that any market prediction worth its salt takes into account the relationship between London and the regions. Sometimes the capital is a useful bellwether for the rest of the country but not always. In the early 2000s, the central London market was booming thanks to an influx of investment from abroad. Such was the popularity of London with foreign buyers that the property market bounced back quickly after the 2008 financial crash - this was as much because of exchange rates as interest rates, something simply not seen in the provinces. For various reasons, successive governments then sought to squeeze the Prime Central London piggybank and overshot.

Pre-pandemic, all you needed for a good London location was a roof terrace, proximity to a vibrant social scene and a tube station. Or a river view. Then everything changed. Whilst central areas have pretty much fallen into the doldrums, a combination of more room, better value and access to green spaces has become essential. If you had all the money in the world, you’d still locate around London’s greatest open green spaces. Hampstead Heath, Kenwood and Regent’s Park to the north, Hyde Park or St James’s Park in central London or Battersea, Richmond, Dulwich or Richmond to the south. For the rest of us, living in a shoe box with little space to work from home is no longer desirable. Can you get more value elsewhere?

The rush to leave London has been a staple of property columns over the last twelve months. Built up, densely-populated urban areas were portrayed negatively in favour of remote locations, but as normal life begins to resume does that characterisation still hold? London is already back on the agenda for many professionals and will remain central to culture, creativity and commerce, especially when restaurants, bars, theatres, museums, music venues and galleries re-open. And yet the urge for green space is not going to disappear overnight. The pandemic may well have changed our relationship with the city permanently.

Would you swap living in London for York? According to the latest survey on family-friendly city living, York tops the list. On a range of measures from childcare costs to average house prices and leisure activities, York is it. Unless your work or family ties take you there, I’m not convinced though. The three-hour train journey into London means a move there would more or less sever your links to the capital.   There's no denying that the capital's house hunters are being tempted increasingly further afield in their property searches. More space and lower prices makes it seem like a no brainer. But the jury is out on whether the pandemic will cause us to ditch the office for good.

It began with a sourdough starter. Then we dabbled with home delivery cocktails. This time round, I watched The Dig and bought a Fair Isle tank top and a blouse with a big collar to wear for Zoom calls. Then, when my husband’s company announced they’d be hiring remotely, we embraced the biggest lockdown cliché of them all: moving to the country. Mentally, we checked out of London and started rubbing our hands in expectation of what we could get in exchange for our terraced house in Zone 2. Outdoor space, a couple more bedrooms - the trade-off many Londoners have come to expect in exchange for enduring the years of a ruinous mortgage and the Northern Line during rush hour. Alas, the reality was as disappointing as the must-watch of Lockdown 1.0, Normal People.

With Rishi Sunak announcing plans for a Stamp Duty holiday extension and floating the policy of 95 per cent mortgages, the boom in house sales looks set to continue apace. So, in an increasingly competitive market, what's the secret to securing the best possible price on a house? Firstly, your relationship with the agent is key, even as the buyer. Despite the fact that most agents are paid by the seller estate agents form their primary relationships with buyers. If you want to live in a certain area find the best negotiator - the person you think can persuade a seller to accept your price. And don't be afraid to badger them. They may not work for you but the squeaky wheel always gets the oil. They want the deal as much as you do.

It's hard to believe we're heading towards the pandemic's first anniversary. The economy has had a torrid time. But if there's one area that has surprised us all with its buoyancy it is the property market. Ever since the first lockdown, there has been a flurry of activity at a time when a market crash was predicted. So, what is going on and should you hop on the bandwagon? The Office for National Statistics reported that UK house prices rose by 8.5 per cent over the year to December 2020. That growth wasn’t in city centres which have, at best, been largely stagnant. Instead it was driven by properties out of town and particularly in rural areas and on the coast near to major conurbations.

As Mark Twain didn’t quite say, there are only three certain things in life: death, taxes and yet another government-backed bung for the housing market. The latest instalment is the 2021 to 2023 Help to Buy scheme, which carries on the theme of offering subsidised loans to first-time buyers – and only first-time buyers. Here’s what is on offer—from April. Buyers can take out a loan of between five and 20 per cent of the purchase price of a new home (or up to 40 per cent in London). There is a cap on the property price on which the loans are available varies from region to region, ranging from £186,100 in the North East to £600,000 in London.

A pattern seems to have emerged in the latter stages of the Covid crisis: Keir Starmer gets wind of discussions within government of possible new lockdown restrictions and calls for them to be implemented immediately – just to make it look as if he is ahead of the curve and the government behind it. We should take seriously, then, Sir Keir’s call for the housing market to be closed down for the duration of the lockdown. At present, in contrast to the first lockdown, it is still permissible for property viewings to take place, and thus for homes to be bought and sold. Yet as increasing numbers of buyers are already finding, for them the housing market has already closed down.

Did anyone get their predictions for the 2020 property market right? I suspect not. We’d barely heard of Covid back in January last year and, if we had, we would have probably written off the housing market for half a decade. But look at property now. Prices are up 5 per cent on average and so too is the volume of sales: £62 billion of extra transactions according to Zoopla compared to 2019. And that's despite the economic hit we've experienced over the last year. I’d suggest the upward trajectory will continue, albeit with a few wobbles. This market movement is being driven by macro factors, not local ones. Low interest rates and economic optimism surrounding a 2021 vaccine could mean continued growth.