The ever-mutating coronavirus is affecting almost every facet of life as we know it. From school to leisure, from work to budgeting – no part of our lives has escaped the reach of COVID-19.
Real estate in the U.K. is no exception to this trend. One of the challenges wrought by the virus is rising property prices. These prices have left the housing market with a high demand for property that far outpaces the market’s property supply.
Undoubtedly, the work-from-home (WFH) regulations implemented by companies across the globe have had a massive impact on property prices in the United Kingdom. Once it became painfully clear how dangerous the coronavirus was, local businesses, multinationals and NGOs enacted WFH policies meant to mitigate the infection rate.
In the New Normal, homes now have to do double duty as residence and place of work. Remote working protocols have increased the demand for bigger houses in which people can have designated office space.
Below are some tips to help aspiring homeowners navigate the current real estate situation. WFH is explored in greater detail too. But first, the price surge is unpacked a little more.
A Closer Look at the Price Surge
Surging house prices in the U.K. are an example of how the pandemic has affected the economy. The recently mandated Stamp Duty and a decline in the supply of houses equally demonstrate the far-reaching consequences of living with a dangerous virus.
Before the lockdowns and other pandemic-induced restrictions, house prices in the U.K. were relatively stable. According to the Bank of England’s Deputy Governor, Ben Broadbent, now that more people are engaging in remote work, the demand for larger houses is increasing. As demand grows, aspiring homeowners and real estate investors face the issue of higher house prices. Higher prices pose an especially trying stumbling block for newbie homeowners as they try to get their foot on the first rung of the property ladder.
The price surge has also affected the behaviour of incumbent homeowners. Under more favourable circumstances, homeowners would put their property on the market whenever they are ready to sell. But now, they are shying away from the prospect of selling their homes for fear of not finding an ideal replacement property. So, real estate agents have less stock to work with, which necessarily jacks up house prices.
Work from Home
The genesis of higher house prices is traceable. Once working from home became part of the New Normal, the demand for housing increased alongside the cost of properties. As soon as employees got accustomed to their new work routines, it became difficult to revert to in-office working hours. In the pre-corona era, Americans, for example, only worked from home 5% of the time. But once the second quarter of 2020 came around, a whopping 60% of the population worked from home. Similarly, recruitment agencies saw an increase in vacancies for remote work. More people were also applying for work-from-home positions.
Since working from home has become part of the New Normal, it is worth acknowledging that not all homes are equal. Some may enjoy the advantage of having a large enough house in which they can have dedicated office space. Others may not be so fortunate and may have to rely on an empty countertop in the kitchen to function as their workspace.
It appears that there are hidden opportunities in the combination of surging prices and remote working protocols. So, homeowners and property investors alike would do well to make the most of these advantages.
When life gives you lemons…
Now that house prices are booming in the U.K., aspiring homeowners should prepare themselves to carpe diem – that is, grab the bull by both horns roll with the economic punches. One way to do this is by looking up the government’s First Homes scheme. The scheme will assist first-time homebuyers so that they can get onto the property ladder in record time.
How it works is that once a buyer finds some real estate that they are interested in buying, a 30% discount on the house price becomes applicable. This way mortgages and deposits will be more affordable, and people will be more likely to buy a home. In some localities, it is possible to negotiate a higher discount. This would fully depend on the local authority.
Having the discount would result in aspiring homeowners being able to put a deposit together at a much quicker pace. For renters, the discount presents an opportunity to begin investing in their own property as they could open a Stocks ISA account to save towards a new home.
The First Homes scheme also targets those who face challenges because of their location. Should they be on the rough end of a commute, the scheme will allow them to find an affordable home in an area best suited to their needs.
There are requisite eligibility criteria to keep in mind, such as the fact that those who have a specific connection with the area they want to move to will have priority. Additionally, those interested in buying a house have to be purchasing their first home to qualify for the First Homes scheme. Their annual income cannot exceed £90,000 and the home that qualifies them for the scheme must be the only property they own.
The praises of the First Homes scheme cannot be sung enough. The discount is also applicable for the rest of the property’s lifetime. Should the market value of a property increase over a five-year period, and a sale is in the offing, that 30% discount would apply to the new sale price of the property?
Though the coronavirus has shaken the world in irreversible ways, not all the changes have been negative. It seems that remote working is a trend that will remain with us long after full and final cures have been found for COVID-19. Bearing that in mind, it makes sense to carefully consider our housing needs and how best to meet them.