Stabilising house price growth as British staycation market expands

Created: 12 May 2022

The growing intrinsic value of British homes continues to be substantiated by demand from both domestic and international homes buyers and property investors. One ongoing post-lockdown effect has been the heightened appeal of staycations and localised tourism. This added exposure to quality residences around the country is one of several contributors to an unabatedly high level of home movers to urban and suburban locations in the United Kingdom.

Abiding trends in consumer behaviour, driven by environmental concerns as well as habitual post-pandemic patterns, point towards a higher propensity for domestic holidays. Recent Mintel research reveals that over 50 per cent of UK adults planned to holiday in the UK in the year through to August 2022. For buy-to-let investors, particularly those focused on short term lets, this has proven a boon to house price growth and rental income.

Annual house price inflation reached 14.3 per cent, according to the latest Nationwide index. Simultaneously, rental growth doubled from 1.3 per cent last year to 2.5 per cent by the end of the first quarter of 2022. This places the average property value for residential British real estate at £267,620 underpinned by robust labour market conditions and a shortfall in supply of housing inventory.

Key phenomena, which may moderate this growth include the emerging cost of living crisis affecting consumer spending power, as well as rising mortgage rates on account of interest rate rises to tackle inflation. Furthermore, availability of housing is a concern. Motivated buyers and renters, now returning to the cities as well as commuter towns, according to Rightmove research, are expanding their criteria to secure deals.

Mortgage approvals surpassed the 200,000 mark for the seventh consecutive quarter, and a Nationwide consumer survey found 38 per cent of respondents were either in the process of moving or considering a move. Both are indicators that the housing market still has room for sustainable growth with stabilisation over the medium term as inflation is curbed by higher interest (and mortgage) rates.

The PMI’s Residential Activity stands at 56.9 in Q1, signalling sustained growth in housing activity. New housing construction output in the first two months of 2022 is up by 10% on the corresponding 2021 level.

https://www.colliers.com/en-gb/research/residential-report-q1-2022

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