Has the race for space been won?
The latest research from The Halifax suggests that cities have driven house price growth this year, as demand slowed for the suburbs. Has the race for space had its day? It seems that as we left our cities it was more a case of hasta la vista baby than goodbye
The WFH Revolution
The COVID-19 pandemic led to one of the biggest social experiments we have ever seen, asking could the economy function if those who could work at home did work at home?
The answer was a resounding 'Yes', Working From Home (WFH) was no longer said with a knowing wink or a nod. During the COVID-19 pandemic, WFH came of age, and WFH was now legitimate.
WFH gave the nation a wonderful sense of freedom during the periods of lockdown, and many, including me, thought we had seen a paradigm shift in working patterns. I had hoped WFH would lead to a true levelling up of the economy, as we were released from tight and painful commuter belts we could live where we wanted to live, rather than within a reasonable commute time from our places of work. Rather than squeezing too many people in London and the South East, WFH freed us to explore. My hope was that wealth would move around the country, helping local businesses across the country and the city exodus would address some of the issues of housing affordability in our major cities.
As a nation, we embraced WFH wholeheartedly, and the race for space was on. Rather than being lockdown in an urban centre, we craved open spaces, bigger gardens and home offices. We could spend more time in bed, and more time with our families whilst working hours could remain the same. The canteen and the water cooler were replaced with zoom and WFH for many was the silver lining of the COVID cloud.
The times they aren't a changing
However, it appears that the rural idyll may not have trumped the allure of the bright lights of the city after all. It appears that we are both social beings and creatures of habit. We soon moved on from social distancing and it seems we have not fallen out of love with the buzz of the city.
The Halifax reported this morning that so far in 2022 house prices in major British cities are up 9.2% whereas those areas surrounding the cities are only up 7.9%, suggesting that the balance of demand has shifted as we left the worst of COVID-19 behind us.
We show in the chart below how house prices in a range of cities across the county have fared against their surrounding more rural areas. The chart shows each city's house price inflation premium or discount to its surrounding area. If the city has a premium (positive value) the city's house price inflation has been higher than the surrounding areas. Not all cities outperformed, but more did than didn't.