Pandemic leading to a ‘race for space’ – and soaring house prices in least populated areas 1 May 2021 Press release from the Resolution Foundation Pandemic leading to a ‘race for space’ – and soaring house prices in least populated areas House prices in the least-densely populated areas of the UK have risen almost twice as much as those in the most-densely populated areas over the past year, which reflects both the pandemic prompting people to choose to live and work outside of busy cities, and the Stamp Duty Holiday, according to new Resolution Foundation research published today (Saturday). The Foundation’s quarterly Housing Outlook examines the impact of the Covid-19 crisis on housing demand across the UK, and considers what might be driving the disparity in house price growth between different types of areas. The report finds that, while average house prices have risen in the UK since the start of the pandemic, it has been the least densely populated areas of the UK that have seen the biggest price increases. Since February 2020, prices have jumped by over 10 per cent in the least dense tenth of local authorities in the UK, compared to rises of ‘only’ 6 per cent for the most populous deciles. The Outlook also finds evidence of so-called ‘urban flight’ (in which workers opt to leave urban areas in favour of more rural locations) from the UK’s biggest cities such as London, Manchester and Birmingham to the hinterlands. In London, for example, house prices in Outer London rose by an average of 7 per cent since February 2020, compared to just 2 per cent on average for those in denser Inner London. Similarly, house prices have risen by 9 per cent in small towns and villages, compared to 6 per cent in the UK’s 12 biggest ‘core’ cities. However, the Foundation cautions that it far too early to tell whether this pandemic trend will prove be a long-term one for the UK. Today’s analysis also suggests that smaller, more limited properties – such as flats – have become less attractive to buyers when compared to more spacious homes. The average price of a flat has grown by just under 6 per cent over the last year, while houses of all types have increased by around 9 per cent. While this is part of a longer-term trend, it seems likely that repeated lockdowns, during which many people were confined in their homes for long periods of time, have fuelled a desire for space, access to gardens, and less crowding. These attributes are typically easier (and often less costly) to find away from city centres, says the Foundation. Equally, the temporary the stamp duty holiday has boosted the purchasing power of second-steppers rather than first time buyers, who are more likely to be interested in, and able to afford, larger properties. However, the Foundation adds that for the growing number of families, choosing a spacious home in a less dense area is not an option. One-in-five children in low-income households spent the first lockdown in an overcrowded home, and people of all age groups are more likely to live in overcrowded conditions today than they were 20 years ago, with the largest increases among families with children. Ensuring that all families have access to the space they need should remain a priority going forwards says the Foundation. Cara Pacitti, Economist at the Resolution Foundation, said: “House prices have risen throughout the UK during the pandemic, but prices in less densely populated areas have seen much bigger increases than those in dense urban areas. This suggests that workers are choosing to move away from crowded cities, and into more rural areas. “The impact of repeated lockdowns, during which people were confined in their homes for long periods of time, also appears to be turning buyers away from smaller, more crowded properties and setting their sights on spacious family homes. “It’s too early to say whether this move away from cities will be a long-term trend. But for many families, escaping to the country is no more than a pipe dream, and the overcrowding that they have faced during the pandemic must to be addressed.” Notes to Editors How the Stamp Duty Holiday has ended the ‘first-time mover advantage’. Prior to the introduction of the Stamp Duty holiday July last year, first time buyers purchasing a home paid no stamp duty on the first £300,000 ‘slice’, compared to existing owners who paid no tax on the value of their new home only up to £125,000. During the stamp duty holiday period, the tax treatment of first-time buyers and movers has been equalised. In practical terms this means that both a first-time buyer and an existing owner purchasing a home at the average UK house price of £250,000 paid no stamp duty as a consequence of the holiday, compared to zero and £2,500 respectively they would have been liable for in its absence.
