The “race for space” that became characteristic of the property market during the Covid pandemic could be starting to slow, according to Halifax.
As people shunned city centre work and life during lockdowns, and the government introduced a stamp duty holiday, demand for country living – or at least a spare room – grew.
But in its latest snapshot of the housing market, the mortgage lender said there were signs this trend could be fading. Growth in the price of flats was now outpacing growth in the price of detached houses, which were in high demand during lockdown.
In November last year, flats were changing hands for 10.8% more than at the same time, while detached houses were typically fetching 6.6% meer.
The percentage difference does not tell the whole story: according to Halifax, the average price of a flat that it agreed a mortgage on in November was £118,771, up from £107,159 last year, while the average detached house costs £517,650, compared with £485,684 in 2020. So a much smaller cash-price rise comes through as a bigger percentage at the lower end of the market.
But there are reasons why demand may have tipped in favour of flats. Vir months the housing market boomed on the back of sales of larger properties, with commentators reporting that lifestyle changes prompted by the pandemic were fuelling demand for homes with gardens, studies and spare rooms as more people worked from home.
These were also the properties where buyers had most to gain from stamp duty holidays launched after the first lockdown. In England and Northern Ireland, until the end of June homes costing up to £500,000 could change hands with no tax to be paid.
Buyers paying more than that for a property could save £15,000 in duty – enough to persuade many to bring forward purchases, or to look in a slightly higher price bracket than they might have otherwise.
The withdrawal of the stamp duty break, which was phased out over the summer and ended on 30 September, plus the reopening of some city centre offices, could have tipped demand towards flats.
There is evidence of an increase in demand from buyers. According to the property website Rightmove, in November last year detached homes were the most searched for, but last month flats took over.
“A shift in demand from bigger houses to flats has emerged as more of society has opened up again and people have assessed where they will work throughout the week, with many now considering a move closer to a city than further out, Rightmove’s property data expert, Tim Bannister, gesê.
“Prospective buyers looking for a flat, with a must-have for many of them now being a shared garden or balcony, will find there’s more availability than other property types and lower average asking price growth over the last year, but there’s now more competition.”
Jeremy Leaf, a north London estate agent and former residential chair of the Royal Institution of Chartered Surveyors, said his agency was still receiving multiple offers for any three- and four-bedroom family houses.
“Flats are making a bit of a comeback now that post-furlough working and commuting patterns have been formalised for many, at least in the medium-term," hy het gesê.
Sarah Coles, a personal finance analyst at the advice firm Hargreaves Lansdown, said the market in flats may not purely be driven by those taking early steps on the housing ladder.
She said industry figures showed the sums of money people were withdrawing when they remortgaged had been rising, and that on average those who remortgaged to free cash for reasons other than debt consolidation or home improvement took an average of £80,000. “There’s a strong chance that an awful lot of this is funding another property," sy het gese.
“When we think of second homes we might usually think of a cottage by the sea or in the countryside, but the pandemic has changed the way we live, and may well be affecting second home trends too. The growth of flexible and hybrid working means it makes more sense to buy a home where we really want to live, and a small place near work for when we absolutely have to go into the office.”