UK TOWN & CITY INSIGHT

Post-lockdown people are thinking: is now a good time to sell, and if so where to next? The resilience of the UK property market has surprised many, and with July’s stamp duty holiday supporting activity, UK mortgage approvals are now close to pre-pandemic levels. There remain challenges ahead, but regional markets are expected to continue to benefit from stronger demand for outdoor space into 2021. In the context of the urban markets Knight Frank serves outside London, demand is up and the combination of space, affordability and employment opportunity has culminated in prices outperforming the wider country market for the past decade. Don't write off the town or city just yet ­– it's a very strong market for house buyers of all backgrounds. Chris Druce Senior Research Analyst, Knight Frank Research

The UK town and city market at a glance

Price growth for properties located in urban settings has outstripped that of rural property for more than a decade, as improved transport links and employment prospects have transformed towns and cities across the UK and proved a strong draw for those seeking a change in lifestyle. Contextualised against growth in country markets – which has been relatively steady – it's easy to see how a property in a town or city can be considered a strong investment choice for buyers and sellers alike.

30%

Price growth in town and city property prices from June 2009 to June 2020

83%

Of the population of England live in an urban area, as of 2018

41,417

People that left London in 2019 to settle in one of our 12 featured English locations

Properties based in 'urban' locations in Knight Frank’s Prime Country House Index, which tracks national prime property prices outside of London, have seen price growth of 30% from June 2009 to June 2020. In contrast, rural properties in the index have seen price growth of 6% in the same period.

Rural properties in the index remained 14% below their September 2007 price peak, as of the second quarter of 2020. However, properties located in urban locations had reached a new high, with prices up 4% on the September 2007 peak, as of the second quarter of 2020.

Urban growth Although 83% of the population of England lived in an urban area as of 2018 according to the Office for National Statistics (ONS), the trend to urbanisation has not abated. While the population in rural areas of England increased by 5.1% between 2011 and 2018, it grew by 5.7% in urban areas in the same period.

Since 2007 we have seen improvements in transport links with the electrification of many mayor rail routes to the capital, projects such as the M6 Expressway link, and the development of employment opportunities elsewhere. Be it HSBC’s new headquarters in Birmingham, Bristol’s growth as a second home for legal and professional service firms or Oxford and Cambridge’s development as leading pharmaceutical and bio-tech employers, urban environs are offering a viable alternative to living or working in London.

Since ONS began recording it in 2011, the annual number of people leaving London for our 12 featured cities and towns in the pages of this magazine – a breakdown for Edinburgh is not available – has increased by 91%.

The 41,417 people that left London in 2019 to settle in one of our 12 featured English locations was the highest annual number to date. This is a figure we could see rise in a post-Covid environment, as people's priorities and values change.

Trading up, cashing in Those relocating from London also bring spending power. The value of homes in England increased 42% from March 2010 to March 2020, according to the UK House Price Index. However, prices increased by 77% and 68% in inner and outer London respectively in the same period. Buyers looking to sell and move out of London are often able to ‘trade up’ as a result.

But who are these buyers? If we look closely at our 13 featured areas, based on three years of Knight Frank sales running to 20 May 2020, buyers are overwhelmingly from a professional background. More than a third (37%) give their source of wealth as professional, while 18% are from a finance background. Other notable sources of wealth are 29% from property and 7% listing themselves as entrepreneurs.

International buyers have made up 7% of sales during the last three years to 20 May 2020 across these 13 featured areas, with 14% of buyers from London. International buyers opted for Edinburgh City; Cheltenham, Gloucestershire; Sevenoaks, Greater London; and Bath in order of popularity. Londoners, in order of popularity, bought in Guildford; Edinburgh City; Sevenoaks; Royal Tunbridge Wells, Kent and Cheltenham. The remainder are domestic buyers with the majority buying locally.

Another thing we must consider when defining the UK's urban property market, is our ageing population. Older buyers value having amenities, family and health services closer to hand, and this is something urban locations are increasingly offering more of, over their rural counterparts.

The ONS states: “In England as a whole, the amount of people aged 65 years and over is projected to increase from 18.2% to 20.7% of the total population between mid-2018 and mid-2028”. This means the market could change significantly to keep apace with attitudes towards property and location.

Education remains a big driver for urban living, however. There are 291 nurseries and schools (primary, secondary and specialist) listed as outstanding by Ofsted amongst the 12 English locations featured in Town & City Life (Scotland has an alternative, non-comparable regime run by Education Scotland) that those with young families will move into an area for.

Where we are today Since the housing market reopened in England new prospective buyers across the 13 locations featured in Town & City Life are 33% up compared against the five-year average. The potential spend of prospective buyers registered across Knight Frank’s 13 featured offices stood at £20.4 billion as of 8 July 2020, which is a 20% increase on the same period in 2019 when potential spend stood at £16.9 billion.

Pent-up demand has seen accepted offers increase 62% in the two months since restrictions were lifted compared with the five-year average. Sellers have responded to the activity in the market, and new instructions for sale increased 14% in the same period compared with the five-year average.

Where to, next?

Despite lockdown, demand has come back strongly with the ratio of new prospective buyers versus new instructions standing at 10.1 in July across the 13 areas showcased in Town & City Life. In July 2019 the ratio of new prospective buyers versus new instructions was 5:9.