Property

No one knows what the ‘new normal’ will look like in the property sector

Alpa Bhakta - Butterfield Mortgages Limited
|
30th April 2021
Alpa 399

Over the past 12 months, a range of words and phrases have come out of obscurity to inform our everyday vocabulary: lockdowns, social distancing, herd immunity, vaccine passport, “can you come off mute please”?

One of the most prominent is ‘new normal'. The loose term that nods towards the fact that even after the threat from Covid-19 has passed, our lives will not return to the way they were. Businesses will operate differently, consumers will behave differently, and society will generally move to a different beat.

In turn, then, the rise of the phrase ‘new normal’ has led commentators across all industries to predict the long-term changes that will come out of the pandemic. This is certainly true of the property sector, where a number of interesting trends have taken shape over the past year––but can we really suggest these trends are here to stay?

Homebuyers head to the countryside

One of the major trends that has consumed a great deal of attention within the property market since the UK first entered lockdown in March 2020 is the rise in the number of homebuyers searching for properties in rural areas.

This trend cannot be disputed; the data shows it has been the case. A recent report from Rightmove, for instance, found that Cornwall had overtaken London as the most popular search location among prospective buyers on the platform. Meanwhile, Cornwall and Devon shared six of the ten most-searched-for areas in March 2021.

The reasons for this trend will be immediately apparent to many people. Firstly, remote working has become the norm for a huge proportion of the UK’s working population during the pandemic – whereas only 5% of full-time workers regularly worked remotely before the pandemic, by the end of last year this figure reached around 50%.

Free from having to commute to the office – and operating under the assumption that remote working, at least on a part-time basis, will remain the new status quo after the pandemic – homebuyers have felt freer to explore options further afield.

Coupled with that, the appeal of living in urban areas has naturally declined during periods of lockdowns. Shops, gyms, pubs, restaurants, theatres, galleries and museums have all been forced to close. Instead, people are spending much more time in parks, going for walks or in their own homes.

It is not surprising, therefore, that evidence shows homebuyers are increasingly favouring properties with more space (larger garden and spare rooms that can be used as a home office).

The struggles of commercial real estate

The closure of offices and the rise of remote working has made for a difficult time for the commercial real estate sector since March 2020. Further, some have predicted that the industry is facing a very serious long-term threat as remote working becomes more prevalent and organisations downsize their offices.

However, in truth, it is far too early to make such a prediction. We must remember that for large periods since March 2020, the UK Government has strongly discouraged people from commuting to the office – employers and employees have had power wrestled away from them, rather than this being an organic trend born out of choice or preference. As such, asserting that this trend is irreversible is problematic.

British Land reported that within a week of the shutters being raised on non-essential shops in England and Wales on 12 April, 79% of UK stores were now open. Meanwhile, another study showed that just 9% of UK office workers want to work from home full-time.

More importantly, KPMG’s recent 2021 CEO Outlook Pulse Survey indicated that only 17% of chief executives plan to reduce office space, compared to more than two-thirds (69%) who said they planned to do so when surveyed in August 2020. Already there is a significant shift in mindset.

We are still in the midst of the pandemic

Ultimately, we are still combatting and coming to terms with the unique challenges posed by the pandemic. Lockdown restrictions are still in place and the Covid-19 crisis rages on around the world. So, making predictions about the new normal and how the property market will look in the coming months and years is extremely difficult.

Whether it is the exodus of homebuyers to the country or the demise of the commercial real estate sector, many of the trends dominating the market at present are the result of the social distancing rules the government has had to enforce during the pandemic – it is extremely difficult to say if they remain the case when rules relax, society re-opens and people regain the power to make choices about where they go and what they do.

For me, that is why the various claim commentators make about the ‘new normal’ must be taken with a hefty pinch of salt. That is not to say the pandemic will not result in long-term change, but simply that we do not know exactly what form said change will take.

At Butterfield Mortgages, we are focused on remaining responsive to the demands of clients and movements within the property market. For us, a diligent approach based on tangible factors remains of utmost importance – of course, we monitor market trends with interest, but we are also careful not to make assertions on what a new normal will look like while still in the midst of the pandemic.

 

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