Are people’s housing requirements changing as a result of the new ‘work from home’ environment? For many years we have postulated that improvements in technology would ultimately result in less requirements for commercial space and changing demands for residential space. This trend has obviously been accelerated by recent events.
The increased frequency of people working from home is leading to a different set of requirements for tenants and home owners. A one bedroom flat in an urban area might be fine split between two people when they both spend only a handful of conscious hours per day there, but when the work, entertainment and living space are all the same space, that suitability changes.
Anecdotal reports show that many people who can move from the cities to more rural locations have chosen to do so, seeking among other things, more inside and outside space.
However is this change starting to be quantifiable in pricing?
We tested three different locations in the UK; Manchester, Edinburgh and Oxford, comparing 1 and 3 bedroom rents, prices, days on market and properties with a balcony or garden against the general market. We primarily used asking price and rent data as it is faster to respond to market changes. The work below can easily be replicated by users of the platform and so only extracts of the results will be displayed.
In both Oxford and Manchester we found increased rents for properties with gardens. In Manchester this increase was significant, whereas in Oxford it was a relatively minor change. This speaks to the difference in the overall environment of the two cities. Manchester being a former industrial hub with a large amount of relatively old, relatively dense housing. Oxford being synonymous with the university, lower density housing and river punting.
Rents in Manchester increased overall by 6% YoY as measured from July 2019 to July 2020, however properties with a garden increased by 9%.
Rents in Oxford increased overall by 0.25% over the same period, however those with gardens increased by 0.5%.
Checking for similar changes in prices of properties with balconies showed a similar pattern. Below is a graph showing the change in prices of 1 bedroom flats in Edinburgh, with balconies, and the market overall. For properties with balconies prices increased 13%, compared to 2% overall.
It seems clear that there is an increased preference for properties with outside space, whether that is for rent or for sale. However these increased preferences are different depending on the characteristics of the location.
We also checked to see if people were actually starting to pay for more rooms to turn a spare room into an office space. We tested 1 vs 2 bedrooms and 1 vs 3 bedrooms however found no conclusive relationship in price changes.
Finally we also checked to see if rather than changes in prices, was it now easier to sell or let properties in more rural locations compared to urban locations. As might have been expected we found that more rural locations have seen the ‘time on market’ gradually decrease, to the point at which today a 2 bedroom flat in Bromley takes less time than a flat in Islington to let.
However as can be clearly seen, this trend was beginning long before lockdowns and working from home became the norm for many people.
These changes are still very much playing out. What is shown here is an early indication that tenants and homeowners are pricing in the value of outside space and that relative to urban properties, rural properties are becoming easier to sell and let. All professionals should take this into consideration when conducting valuations and viability assessments.
© Treex 2020