It took less than a week to sell a two-bedroom garden flat in north London, with a guide price of £950,000. Featuring a large patio, garden, oak floorboards and underfloor heating, it is in a mixed area on the outskirts of Islington and Camden.
“We’ve been inundated with people wanting to see it,” says Andrew Groocock, a regional partner at the estate agents Knight Frank, which helped organise 23 viewings. “It ticks the boxes of exactly what’s hot in the market at the moment. It’s still an incredibly buoyant market. The last two years have been remarkable.”
UK inflation has hit a 40-year high of 9%, the cost of living crisis is worsening as food and energy bills soar while real wages are falling, and UK interest rates are on their way up – but the housing market is still exuberant. House price growth may well have peaked, but the “race for space” that started during the Covid pandemic continues. Many people have embraced hybrid working and spend more time at home, driving up demand for bigger properties with a garden.
Andrew Perratt, the head of country at rival estate agent Savills, says commuter belts around big cities remain property hotspots – and the commuter zone has been stretched because people who do not need to be in the office every day are prepared to travel further.
Estate agents say demand is far outstripping supply as many properties get snapped up within a week or two, while it takes new sellers longer to put their homes on the market. Agents talk of bidding wars, and would-be buyers sending personal letters with pictures of their children and pets to market themselves to sellers, in a desperate effort to secure a purchase.
Lucy Joerin, a joint managing director of the Oxfordshire-based Stowhill Estates, says large family homes that took six to nine months to sell before the pandemic now sell within two to three weeks, with one coming under offer within four days of being launched.
“It’s not always the highest offer,” she says. “A lot of our buyers are putting together CVs, almost like a pitch to sellers … A key thing is that families are going to participate in village life.” She recounts that two buyers who were successful in recent days made a “lifestyle pitch” – sending letters about their families, with photos and promises that the children would go to local schools.
Jeremy Leaf, an estate agent in north London, says when he was keen to buy a particular flat 30 years ago, he also put personal notes through the door. “Why not?” he says. “Do whatever you can to get a property, particularly when it’s in such short supply and you want a particular road or catchment area.”
Several large family homes in Dulwich, an affluent neighbourhood in south London, on the market for between £1.2m and £2m, have just had sales agreed “well above” the guide price, Groocock says.
Two of them sold within a week – a three-bedroom house, priced at £1.5m, had 47 viewings and 23 offers, while a five-bed house, on the market for £2m, had 46 viewings and 29 offers. Some go to sealed bids – where all bidders simultaneously submit offers to the agent without knowing what rivals are prepared to pay.
About 40% of properties being marketed by Knight Frank across London are under offer at the moment, which is unusual. For the first time since the Covid pandemic struck, Middle Eastern buyers are returning – with a number booked in over the next two weeks to look at modern apartments in Kensington and Notting Hill.
The frenzy may be short lived. With a deepening cost of living crisis and interest rates rising as the Bank of England struggles to tame inflation, there are some who fear the housing market could go into freefall, though others believe a crash can be avoided.
This week’s labour market data showed “there are more jobs, more vacancies than unemployed people, so that’s going to give confidence that people can meet their obligations in terms of repayments,” says Leaf.
Renters, faced with a triple whammy of soaring rents, energy and food bills, will struggle more. Monthly rents are 40% higher than 10 years ago, and tenants are feeling the full effect of rising costs, according to the property website Rightmove, with charges rising at the fastest pace it has ever recorded.
Those able to buy their own homes have fared better. The Bank of England started lifting its base rate in December, and it has risen from the 0.1% level it had been at for three years to 1% this month, and more rises are expected, but mortgages are still cheap by historical standards, brokers say.
Leaf says that the speed of the housing slowdown will depend on how aggressively the Bank of England raises borrowing costs. “A correction is less likely this time as interest rates are lower so debts are relatively more manageable, though it is still very difficult of course for some in the midst of a cost of living crisis.”
Jonathan Harris, the managing director of the mortgage broker Forensic Property Finance, says: “The market will probably plateau for a while. We will see steady rises in interest rates, not massive hikes.”
With three-quarters of borrowers on fixed-rate mortgages, according to the trade body UK Finance, many people’s monthly payments have not been affected yet. Those wanting to buy are keen to fix, typically for five years, while there is also more interest in fixing mortgages for seven or 10 years, brokers say.
“Fixed rates have been the product of choice for some time now,” says David Hollingworth at L&C Mortgages. People can fix their mortgages for five or 10 years at a similar rate, at just under 2.5%. The situation is volatile, with lenders advertising and then pulling rates weekly.
But Leaf says the outlook is better than in 2008, when the market crashed and some properties lost 50% of their value. “Repayments, interest rates have been so low, and even those who are suffering, hopefully they won’t be repossessed and they won’t get into huge debts, as some people did previously,” he says. “It’s different from last time.”
