“In Q1 2022 at Robb Residential we saw the property market maintaining its robustness. The demand spike prevails and, hand-in-glove, the shortage of supply remains. As a result, we continue to witness an upward pressure on prices and, on average, our sales are achieving 20% over the asking price.”
It might have only been 12 weeks, but a lot happened in Quarter 1 2022, and it’s time to consider some of this in the context of property, both sales and lettings, for the Q2 2022 report from Robb Residential.
We’ll examine these markets below, but it’s right to factor in the war in Ukraine, the creep of inflation, and the squeeze on standards of living: and how they all combine to bring focus on the year ahead; and beyond. Fortunately, it’s far from doom and gloom.
Demand for Country Living
The long tail of the pandemic persists, as the move from cities to more rural, less urban areas continues in 2022. Yes, cities are busier and urban life is starting to feel more normal, regaining some of its pre-2020 hustle-and-bustle, but the psychological effect of the pandemic remains: people are now alive to other possibilities and realities.
In our Q1 report we predicted this year would see a continued supercharging of the country and coastal markets as families, retirees and younger buyers searched for a more controlled pace of life. At Robb Residential we have continued to see a very busy marketplace, with properties attracting large numbers of viewings, multiple bids well over the Home Report valuation, and many a home changing hands at an eye-watering price. It’s still an excellent time to sell, and this sellers’ market will obtain for the foreseeable future.
Argyll and Bute – with its picturesque coasts and rolling, verdant farmland and hills – continues its exceptional popularity.
Undoubtedly many people working from home were doing so because it was necessary. Offices and other places of work were shut, and governments around the world were asking people to stay put. Even as we drafted this report Shanghai – a city of 26 million people – was engaged in the early stages of a full-scale lockdown.
But whilst many people are now returning to places of work, the pandemic accelerated virtualisation, digitisation and other technologies needed to work from home whilst having – 100% – the capabilities of the office. And those people who have extended their home or built a garden office will most assuredly be keen to still enjoy those benefits.
A blended working model is here to stay, in the main. Now that we at Robb Residential can get back out into the city for a G&T of an occasional evening, we are meeting friends and acquaintances who seem to represent the spread of expectations – one day a week; three days a week; a few days a month – regarding office attendance.
We know of one large bank where, even prior to the pandemic, a “remote first” policy was in place for many teams. This same bank had started to downsize its commercial property footprint in 2014 – COVID-19 has brought such strategies into sharp relief.
The cost-of-living conundrum will also be a factor. As we move into the more clement weather and the heating doesn’t need to be on, we feel that people will have that added incentive to work from home if they can, especially if this means not forking out for costly petrol on commutes by car.
Meanwhile, Robb Residential continue to see northward migration from the Home Counties and other parts of England. The desire to exit metropolitan areas and their surrounding conurbations is one driver in the medium-to-prime section of the Scottish property market.
We still expect the philosophical battle between remote and office working to be regularly in the news, but ultimately many white-collar jobs are going to adopt some form of blended working model.
Come mid-February 2022, there were over 1.3 million job vacancies in the UK, over 700,000 more than in February 2021.
The entire market is a jobseekers’ paradise, and where these are office-based roles, a mixture of back-to-work and working-from-home is almost certainly assured.
For those entering the workplace out of university, office v. homeworking has a different slant and there is a balance to be struck – the world is coming to learn we now need to co-exist with COVID-19. For graduates and those on the early rungs of the career ladder, the lack of monitoring, coaching and on-the-job learning must be challenging, and some office access is going to be necessary.
Therefore, despite challenges around urban stock levels, there is going to be demand throughout the length-and-breadth of the sales’ and lettings’ markets, from the one-bedroom flat to larger properties, as newcomers enter the urban market and others seek to leave it.
In our Q1 report we noted that the impact of staycations, resulting in less stock availability, combined with the pent-up demand for a continued need to have some access to cities, would continue to affect lettings – as yet, we see no material change to this trend, especially as cost-of-living increases may start to determine holiday destinations, especially for families.
One Letting Agent in a major Scottish city has for months been advertising almost no new lettings, and instead is continually seeking new properties to rent out.
Across the lettings’ marketplace, most properties with long-term sitting tenants are now under performing, yield-wise. Robb Residential are pointedly proactive with appropriate, annual rent reviews. Landlords are benefiting, and this is leading to more instructions. And if a long-term tenant departs, we see some uplifts of around 25% more per month, greatly improving property income.
Property Investor Today have written about the ongoing popularity of the staycation and even though they don’t reference too many wider economic factors, the numbers are staggering – just yesterday Business Traveller magazine reported a jaw-dropping dive in revenue of £10 billion for UK airports since the start of the pandemic. And as reported elsewhere in the media, Heathrow passenger numbers are at their lowest in 50 years.
If you consider changed habits, pandemic investment in homes and home life, the crunch on living costs, and the discovery of what’s on our doorstep, it will take many years to see if we ever revert to the kind of travelling many of us did pre-2020. And, undoubtedly, an increasing number of us are more climate conscious, and we can expect that to impact travel aspirations over time.
All of this will continue to squeeze lettings’ availability. We shouldn’t expect another spike in rental rates, but too many factors are at large to suggest lettings won’t continue to see improved yields this year.
At Robb Residential our policy is to have annual rent appraisals, building in profit for both us and landlords alike, whilst mapping out the near future for the tenant. Peace of mind for all.
“While the market remains strong, it’s prudent to acknowledge there is some fragility connected with this. One would think inflation, rising interest rates, costs of living and energy prices – combined with geopolitical issues – would sap confidence. However, at the time of writing, there is no evidence to suggest any such disruption. For now, nerve is being held, capital values continue to increase, and the property market continues its unabated buoyancy.”
Given all the macroeconomic factors, there is much debate about property values’ general trend, and what the future might hold. Here is what we know.
The UK continues to achieve record prices, the average home now being worth £245,000, according to Zoopla (as reported in Forbes). In the same report and article, house prices are showing trends of growth between 8% and 10% in the last year, depending on where you take your 2021 baselines. Remarkable stuff.
Zoopla observe family homes are especially desirable, given the continued drive for space. And the urban market is recovering, too. All of this supports all our words above, and Robb Residential are here to assist all who may be thinking of entering these markets.
However, it would be disingenuous not recognise that some of this demand-led-increase is driven by a lack of stock: plus, let’s face it, we can’t all keep moving house. But, for now, the housing market continues to flourish. And as Warren Buffet once said, the best time to invest is when you have money. So, if you come out of the pandemic cash rich, and you fancy a move, now’s a time as good as any.
For those thinking of selling, striking while the iron is hot would give time to ponder the next, literal, move, especially in the uncertain face of matters in Ukraine, along with our own cost of living squeezes.
COVID-19 led to fundamental moves in the patterns of life and leisure and it would be folly to predict an automatic reset to pre-pandemic norms. Indeed, a recent Centre for Cities event (here) highlights the complex nature of any recovery mimicking the prior status quo.
In summary, there are generalities around the differences between midweek and weekend recoveries, plus the delta between towns and cities. But then, for local reasons, some cities fair better than others: no single formula is going to wind back the clock for all.
You may have witnessed this yourself in microcosm – some bars and venues retain quasi-lockdown-style operations, whilst others are more relaxed, keen to revert to the days of 2019. Others struggle to get staff, so cannot open as they wish; and whilst cities appear busy in the evenings, many offices remain – at best – 50% occupied, so the days seem more like a busy Sunday than the previous throngs of midweek.
Many of us – this author included – have found new rhythms of life that suit just fine and that – almost certainly – would not have been adopted under the enjoyable rigours of pre-coronavirus days.
Many of the changes we see now in our business and private lives will remain, and for the foreseeable future this principle should translate into a continued boost for the housing market as people continue to reconnect with their homes and local areas, whilst pondering new horizons in their daily working and domestic lives.
Previously we reported “the spectre of inflation looms.” What economists had been arguing about has firmly arrived, assisted by the war in Ukraine and, both separate and related to that war, a serious hike in energy prices.
The Office for National Statistics has recently reported (here) the Consumer Price Index (CPI) is at its highest since 1992:
“The Consumer Prices Index (CPI) rose by 6.2% in the 12 months to February 2022, up from 5.5% to January. This is the highest CPI 12-month inflation rate in the National Statistic series which began in January 1997, and the highest rate in the historic modelled series since March 1992, when it stood at 7.1%.”
Taking the wide and long view, this is news that no one wants to read, but Robb Residential is well insulated from this current trend, given that for two years the entire UK population has practised a serious shift in discretionary spending, and we believe short-term creeping inflation will refocus people’s minds on what they need and want, with the realisation that many of those things can be had on their figurative doorstep.
Even with the war in Ukraine, and energy price rises, the Bank of England forecast still (per our Q1 report) see inflation rising, then starting to fall as the shorter-term impacts of the pandemic – disrupted supply chains and raw material price hikes etc. – start to fade.
Throughout 2021 the desire for better, more homely, outdoor living became common: this continues in 2022 as multiple buyers seeks quality properties in prime rural and coastal locations.
As many head back to the office some of the time, hybrid working models are now giving employees more flexibility as companies rationalise property footprints, ensuring suburban, countryside and rustic living are as desirable as ever.
We expect the cost-of-living squeeze to somewhat mimic one impact of the pandemic, re-focusing our lives around our homes and those elements – sporting, social, domestic – that we can keep close, and under control.
The war in Ukraine is one factor that is hard to accurately predict unless, perhaps, one is in the intelligence services. Just a few weeks ago one of our team was at a talk on Ukraine and the speaker spoke highly of the quality of intelligence so far – but how will the war end, or will it rumble on in the background and become less newsworthy? Whatever happens, we need to pay close attention to see how it impacts the energy sector, and overall market confidence.
With our 100+ years of combined experience in property, and with our principal Iain Robb’s long history of operating in these desirable marketplaces, Robb Residential are very well-placed to be your agent of choice in 2022. We offer true agency skills and advice: we don’t just promote and sell your home; we find the right buyer at the right price.
Robb Residential are an Estate Agent based in Glasgow who deal in a range of unique and beautiful properties in the middle-to-prime market in Scotland. For more information, please contact us, email or call on 0141 225 3880.
Note: statistics, percentages and references are correct at the time of writing.