We’ve all seen the headlines. Rocketing rural house prices, ‘urban flight’ from Britain’s cities, and ‘new normal’ think pieces galore. But what does any of this mean for the UK housing market in the long term? 

Is the shift from urban to rural permanent? And, if so, what does that mean for the future of housing in our cities? 

Remote Working Isn’t Going Anywhere

The first thing to acknowledge is that working from home is here to stay, at least for the foreseeable future. According to the Office for National Statistics (ONS), the number of people working from home has doubled in the last year. Roughly a quarter of workers (25.9%) worked at home at least some of the week, up from 12.4% in 2019. 

For many of those workers, the change is likely to be permanent. Almost all of the UK’s top fifty businesses stated that they had no plans to bring staff back to the office full-time when asked by the BBC. And some estimates put the number of people set to switch to permanent remote working as high as 1 in 4. 

It’s not hard to see why this is happening. Few of us miss the grind of the early morning commute or the expense it brings with it. At the same time, we’ve all grown used to spending more time with our families, getting out of bed later, and having more time for leisure. 

Meanwhile, for many businesses, it’s a no-brainer. Happier workers are more productive workers. And switching to permanent remote working means either no office or a much smaller one – dramatically cutting real estate costs. 

So, while some high profile business figures (not to mention commercial landlords) may view working from home as an ‘aberration’, all the evidence points towards remote work (at least some of the time) as the new norm. 

A cautionary note 

Although the figures tell an interesting tale about changing working habits, they don’t tell the whole story. Whether people have spent the last year working from home or not largely depends on where they live and what they do.

To illustrate, according to the ONS report we mentioned earlier, 46.4% of people working in London said they’d worked from home at some point during 2020. And these people were largely concentrated in affluent suburb. Or, in other words, where white-collar workers tend to live. For example, more than 70% of people in leafy Richmond upon Thames said they’d worked from home during the last year. 

In contrast, home working was least common in Burnley, Middlesbrough and rural Scotland (all 14%). So it’s important to stress that remote working is very much a major city, or even London-based, phenomenon. 

Demand is Changing

With many office workers facing a future working from home, London (and many of the UK’s larger cities) have lost some of their appeal. Why live in or very close to London, with its expensive housing, pollution and lack of space, when you don’t need to commute to the office? And after spending most of 2020 inside, it’s understandable why many people have decided a garden or access to open spaces is no longer a nice-to-have. 

Add to this that people also need a property with a home office, often for two people, and it’s not hard to see why demand is shifting.  

What’s more, this is borne out by the figures. According to Rightmove, 2020 saw a 78% yearly increase in enquiries about rural or suburban property from people in the UK’s ten largest cities. And there was a 126% increase in interest in village locations.

This trend is evident wherever you find a large concentration of office-based workers. Liverpool saw a 275% increase in people looking for property in villages, Edinburgh 205%, and Birmingham 186%. Meanwhile,  Hamptons estate agents report that 63% of new purchases in Tandridge in Surrey and Sevenoaks in Kent have been bought by fleeing Londoners. 

What Will Happen to Our Cities? 

Traditionally, it’s been potential buyers in urban centres that were more likely to be met with high prices and soaring demand. But perhaps that’s no longer the case. The process many are calling ‘urban flight’ has led to property values in less densely-populated areas rising twice as fast as within cities. 

Research from the Resolution Foundation revealed that since February 2020 prices in the ten least-populated local authorities have increased by more than 10%. That’s compared to a 6% rise in major cities. 

So what does this mean for the market in our cities? Is this change permanent? Are we about a see a continuing exodus from the urban to the rural? And are prices in cities set to plummet? Let’s consider each in turn.

First, the switch to remote working is likely to be permanent for at least some people. This means that demand for rural and suburban property will probably remain high for a while to come. However, it’s important to state that the number of people working from home is still far from a majority.

There are plenty of people for whom living in the city is still appealing, and even more who have little choice but to stay. Lifelong urbanites and those with close family ties are unlikely to up and leave. Likewise, the half of Londoners who don’t work from home are also likely to stay. 

The young will still find London, Manchester and Birmingham exciting places to live (especially as nightlife returns). And for many people, moving to the increasingly expensive countryside just isn’t financially feasible without moving hundreds of miles from the cities they know and love.

This brings us nicely on to prices. While it’s true house price growth in urban centres have dipped slightly, they haven’t crashed. For example, the average price of a London home dropped 2% in April and the capital is experiencing the slowest growth of any region in the UK. However, London has been experiencing negligible growth in house prices since its post-financial-crisis high in 2017. And the 2% dip is just as likely to be caused by a fall in demand after the stamp-duty scramble as it is grand shift to countryside.  

Add to this that the UK’s major cities remain very attractive locations for property investors and it seems doubtful we’re about to see a major price fall. Our cities may become slightly more affordable and a little less densely populated, which is no bad thing. But any talk of a seismic shift in the residential property market is a little overstated.