For many decades in the UK, there has been a clear and constant increase in urban, city living while countryside populations have fallen. The main cause for this was, of course, jobs – there are more on offer in cities than in the country. But, in the wake of Covid-19, this trend is now reversing.
According to new data from Cornerstone Tax, the stamp duty holiday has fueled a desire for bigger houses and more outdoor space due to people having been stuck inside for over a year throughout the pandemic lockdown. Buyers are, therefore, now more interested in living in more rural countryside locations than they are in cities. This city rejection comes as no surprise. What is a surprise, however, is the scale of the rejection.
The data tells us that 44% of British people no longer consider city living to be a desirable concept, with many leaving the city and saying they’re never to return.
This trend is now threatening to cause significant damage to the UK housing market, with some experts predicting that we’re well on our way to a market crash. There are simply not enough houses in the locations where people now most want to live.
So, as demand rises and supply remains low, house prices can only go up. Further data from Moveable tells us that at least 12% of recent buyers paid thousands more than the asking price in order to secure an ideal home in their desired location. And while the public’s willingness to do this was predicted to decline with the end of the stamp duty holiday in June, the facts and stats show that this simply isn’t the case.
Why is it bad for house prices to keep rising?
If price rises show no sign of slowing, it means they can only keep rising which has led many leading forecasters to suggest that the housing market is now overinflated, a bubble on the brink of bursting.
If the bubble does burst, and the incredible demand we’ve seen over the past 18 months suddenly drops off as buyers finally reach their breaking point and become unwilling to pay the increasingly overinflated prices, the market will crash.
No demand means prices will fall, and while this will be good news for those wanting to buy a new home, it will be very bad news indeed for those who just have. Suddenly, a house you’ve just paid £300,000 for will see its value drop significantly. In many cases, due to the fact that the recent price rise has been the result of an extraordinary global catastrophe, homes may never again reach the inflated prices people have been paying.
On an individual basis, the biggest concern will be negative equity – the mortgage they have agreed to pay is worth more than the home they used it to buy.