Younger house buyers are just as keen on building a new life in the country as they are to move to the bright lights of a big city as they react to the post-pandemic changes in working patterns and rapidly rising property prices.
Data released on Tuesday by the Nationwide building society showed that demand for property has pushed average house prices up 10.9% over the past year, the fastest pace for almost seven years.
Prices rose on average by 1.8% in May, after a 2.3% rise in April, according to the figures, pushing the annual rate of increase up from 7.1% a month earlier.
As a result, the average price of a house in Britain has hit a high of £242,832, up nearly £24,000 over the past 12 months. A decade ago, in May 2011, the average UK house price was below £170,000.
The price rises are being driven by a “race for space” as buyers search for bigger homes and gardens, according to the mortgage lender’s research. Almost a third (30%) of buyers are planning to move so they can access a garden or outdoor space more easily, while a similar figure want to buy a larger property.
More than 20% of buyers who have moved or want to move say they want to “get away from the hustle and bustle of urban life”, according to Nationwide. While there is stronger preference for rural living among middle-aged homebuyers, many younger buyers are also seeing the attractions of rural locations.
While a quarter of 18- to 24-year-olds still want homes in larger cities and towns, the Nationwide survey shows an equal number are heading to villages to make their homes in more bucolic settings.
“One of the first questions we get is whether there is decent internet speed,” said David James, partner at James Dean estate agents in Brecon, which operates in mid and south Wales. “Our biggest price increases have been for four- or five-bedroom detached houses where people can have one or two offices and work from home.”
Frances Clacy, research analyst at the estate agent Savills, said the opportunity to work from home, combined with more affordable property, was attracting younger buyers to more rural locations. “Many young people can’t afford to buy in London or larger city centres without support from the so-called ‘bank of mum and dad’,” she said. “Affordability pressures are less acute in village and rural markets, which have tended to underperform since 2007, so it does give more capacity for younger people to be able to afford to buy there.”
Stuart Bailey, head of prime London sales at the estate agent Knight Frank, said: “The escape to the country phenomenon, which has clearly taken place, has not come at the expense of London.” He said the capital was not losing its allure, and that his company had seen an 8% increase in transactions in London compared with last year.
“It is quite an extraordinary market where you have the country, London and the rental market all doing well at the same time. It just goes to show the demand from people, when there is a shortage of supply.”
Record low interest rates, combined with the extended stamp duty holiday, have also boosted the market, which has also made it harder for first-time buyers to get on to the housing ladder.
No stamp duty is payable on houses sold for less than £500,000 in England and Northern Ireland until 30 June, after which it will be reduced to £250,000 for three months, before returning to its original level of £125,000.
The temporary tax break has brought some house purchases forward, according to Nationwide, but the lender says it is not the main driver of transactions. “While March’s spike in transactions was driven by the original end date of the stamp duty holiday, a lot of momentum has been maintained,” said Robert Gardner, the chief economist at Nationwide. “Our research indicates that the extension to the stamp duty holiday is not the key factor, though it is clearly impacting the timing of transactions.”
The housing market boom marks a complete turnaround from last May, when property viewings were allowed to resume after the first nationwide lockdown.
Nationwide said it expected the market to remain “buoyant” over the next six months, but cautioned that the longer-term outlook was more uncertain.
“If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply, though even this could potentially be offset by ongoing shifts in housing preferences, if current trends are maintained,” Gardner said.
The rise in house prices is being watched by the Bank of England, which is monitoring whether the UK’s post-pandemic economic recovery could lead to a sustained period of inflation.