2021 has been a year of uncertainty for many prospective homeowners – but there is always opportunity in crises. After three successive lockdowns and in the midst of a largely successful vaccination programme, the effects of Covid-19 on the UK property market are beginning to materialise. Now more than ever, renters, homeowners, and buy-to-let property investors are looking further afield than “prime” London property as commuter towns become much more appealing property choices. These effects are so pronounced that while rental prices of prime London property fell by 8.6% y-o-y, commuter zone prices rose 5.4% over the same period.
At IP Global’s virtual round table event of over 400 registrants, investors echoed this trend: almost a quarter would now consider investing in commuter town property rather than prime city-centre locations. The underlying cause for this is undoubtedly pandemic driven. However, there is significant evidence suggesting that changes are more than just short-term fluctuations and point to a massive shift in lifestyles after lockdown. With London’s economy accounting for almost a quarter of the Nation’s GDP, it’s hardly a surprise that the commuter town property near the Capital is drawing most investor interest.
One of the most pronounced impacts of the pandemic has been the way we work. By April 2020, 46.6% of workers in the UK transitioned to a work-from-home routine at least temporarily – 86% of which was a direct result of Covid-19. Many businesses intend to make these routine changes permanent, and, together with the effects of several lockdowns, the appetite for property in key central business districts is dwindling. Instead, people are starting to look for property in commuter belt towns and nearby areas where rent and property prices are cheaper, and space is abundant. Rents in prime areas fell by an average of 1.3% in only the third quarter of 2020, while commuter zone prices instead rose by 1.2%.
As the pandemic swept through the UK, a “halo effect” has emerged with property prices. As growth started to slow in the centre of the UK’s capital city, it steadily increased in most commuter belt towns. According to the Office for National Statistics, property prices in London grew by only 4.6% in the 12-month period ending February 2021. This is significantly lower than the 8.9% annual price growth across England, let alone commuter belt areas like Broxbourne where prices rose upwards of 11.0%. Unsurprisingly, commuter towns like High Wycombe, Peterborough, St. Albans and many more are gaining a significant level of interest from buy-to-let property investors, renters, and homeowners alike. So why exactly is the commuter zone suddenly getting all this extra attention?
Without there being a necessity to live in the prime areas of London, commuter zone properties have piqued the interest of many more. For those who have fully or at least partially transitioned into a work-from-home lifestyle, space both inside and outside the home is essential. Commuter town properties offer just this: the further out from the centre of London you travel, the more space you will get for your money.
Another advantage of commuter belt towns is that they are, in general, more affordable than property in London itself. Some of the top commuter towns like Cheshunt, Waltham Cross, and High Wycombe have average property prices of £384,248, £390,612, and £331,092, respectively.
There is a substantial argument that the “halo effect” of property prices is here to stay. With routine changes like work-from-home policies proving effective, many of the fears that prevented them from happening long before the pandemic have been dispelled. This is not only echoed in the UK but all over the world where people have had to push the boundaries of technology and find that, actually, most office work-related activities can be performed and measured remotely.
As more concrete work-from-home and flexi-work policies are adopted across industries, real estate in commuter zones is becoming an ideal buy-to-let investor’s market with strong rental and capital growth prospects. In fact, homes are letting up to 30% faster when compared to pre-Covid-19 times, making them a great choice for prospective property investors.
With more and more of London’s workforce exploring the city’s outer reaches for more spacious and affordable property, prices are bound to increase. Data has already begun to evidence this trend, suggesting that those looking to invest in property should get in on this market before prices settle at a new, higher norm.
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