Inventories to Interest Rates, What’s Next For UK Property?

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With so much turbulence affecting buyers, sellers, banks, builders, investors and estate agencies, we break down the trends that are shaping the UK market.

Rebecca Poynton
Sep 12, 2023
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There’s No Place Like Home

The UK real estate market boasts a rich history and unique characteristics that set it apart from other international markets. From the bustling cities to the picturesque countryside, it continues to offer an attractive and diverse range of properties and investment opportunities, despite economic turbulence. 

Here’s a look at some of the trends that are shaping changes in the market, (ones that are expected to last quite a while). 

Rising Demand for Affordable Housing

One prominent trend in the UK real estate market is the increasing demand for affordable housing. As property prices continue to rise, especially in major cities like London, there is a growing need for accessible and affordable accommodation. 

There are a few additional reasons too: a population that is slowly but surely growing every year, as well as issues like climate change, (nearly 30 million houses are in coastal areas that are becoming inhospitable or too costly to retrofit due to rising sea levels). 

The government has introduced various initiatives, such as Help to Buy and Shared Ownership schemes, to support first-time buyers and low-income households in purchasing their own homes. £11bn has been set aside under the Affordable Housing Programme to build 180,000 affordable homes over the next 5 years. The Scottish government pledged to build 100,00 affordable homes by 2032, while Wales has already reached its goal of building 20,000 affordable homes with plans to build another 2,500 in the next five years. 

Continued Growth of Build-to-Rent Sector

The build-to-rent (BTR) sector has experienced significant growth in recent years. Designed specifically for rental purposes, BTR developments offer high-quality, professionally managed properties to meet the demands of a growing number of renters. Not only does this trend provide renters with more options and amenities, but it also attracts institutional investors looking for long-term, stable returns on their investments. 

So far, the number of completed BTR units in the UK has tripled over the last five years due to market pressure, while statistics reveal investors remain attracted to the rental sector because of the resilience of the rental market in times of economic downtime.  

Emphasis on Sustainability

Sustainability has become a major focus in the UK real estate market, driven by increased environmental awareness and government regulations. A survey showed that 93% of real estate investors think the pandemic was a wakeup call to put ESG on top of the agenda, while 83% of occupiers believe the link between corporate real estate and sustainability should be a board-level priority. In fact, 45% of corporate occupiers said they prioritize buildings with green credentials, (expected to rise to 85% by 2025). 

Developers are incorporating sustainable features into their projects, such as energy-efficient appliances, solar panels, and green roofs, as well as utilizing recycled and eco-friendly materials. These sustainable initiatives not only align with the UK's commitment to reducing carbon emissions but also attract environmentally conscious buyers and tenants, who prioritize properties with a reduced environmental impact.

Rise of Co-Living Spaces

The concept of co-living has gained popularity in recent years, providing residents with private bedrooms and shared common areas, and fostering a sense of community and affordability. 

This trend caters to young professionals and students who seek affordability, social connections, and convenience. Co-living developments often include amenities such as co-working spaces, gyms, and communal kitchens, creating a unique living experience. According to Savills, 51% of European investors said they plan to invest in co-living spaces in the UK over the next three years. 

Regional Development: Beyond London

Like the BTR trend, the co-living concept started in London, (accounting for over 80% of the total UK market) but 2023 has seen this trend pick up speed in the regional markets (in fact, regional co-living numbers are expected to take over the capital very soon). 

While London is often considered the epicenter of the UK's real estate market, there is a notable trend of regional development outside the capital. Cities such as Manchester, Birmingham, and Leeds are experiencing significant growth in terms of investments, infrastructure development, and property prices. These regional cities are attracting businesses, investors, and residents looking for lower costs and untapped potential. The growth of regional markets presents opportunities for buyers and investors to explore alternative areas with high growth potential.

Impact of Remote Work

The COVID-19 pandemic has accelerated the adoption of remote work and flexible working arrangements in the UK. As more companies embrace remote work policies, there is a shift in housing preferences. Homebuyers and tenants are now prioritizing properties with dedicated home office spaces, access to reliable internet connections, and proximity to green spaces. 

The increased flexibility in work arrangements has also led to a rise in suburban and rural property demand as people seek larger homes and a change of scenery. Lloyds Bank reported that five UK regions, Eastern England, Greater London, South East, South West and West Midlands - saw the average price of a detached property rise by more than £100,000, as a direct response to the radical changes to people’s lifestyles and working habits brought about by the lockdown. 

The Rise of the 15-Minute City 

The pandemic also brought about a new (sometimes controversial) concept: the 15-minute city, where you can do all things you need to do within 15 minutes. This would include work, shopping, education, healthcare, leisure, among many other amenities that may be needed in daily life. The idea has been backed by some local governments as a way to try to cut down on carbon emissions and traffic, while leading academics and urban planners support the idea of a world where walking once again becomes our most common mode of transport. 

According to YouGov, 62% of Britons favour the concept of a 15-minute city and say they would support local government in attempts to adopt this structure, albeit it would be an arduous process. Several local governments, including Bristol, Ipswich and Sheffield, have all said they hope to implement a 15-city plan, while Oxford has said it aims to be a fully functioning 15-minute city by 2040.

For more ways to stay on top of changes in your local market, see our recent blog post on using data to drive strategy.

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