It took less than a week to sell a two bedroom garden apartment in north London at a target price of £950,000. It has a large terrace, garden, oak floorboards and underfloor heating and is situated in a mixed-use area on the outskirts of Islington and Camden.
“We were inundated with people wanting to see it,” says Andrew Groocock, a regional partner at real estate agents Knight Frank, who helped arrange 23 viewings. “It fits right in with what’s trending in the market right now. It’s still an incredibly vibrant market. The last two years have been remarkable.”
UK inflation has hit a 40-year high at 9%, the cost of living crisis is worsening as food and energy bills soar while real wages fall and UK interest rates are rising – but the property market is still buoyant. Property price growth may have peaked, but the “race for space” that began during the Covid pandemic continues. Many people have embraced hybrid working and are spending more time at home, increasing demand for larger properties with gardens.
Andrew Perratt, head of country at rival real estate agent Savills, says catchment areas around major cities remain real estate hotspots – and the catchment area has been expanded as people who don’t need to be in the office every day are willing to travel further.
Real estate agents say demand far exceeds supply, with many properties being auctioned off within a week or two, while new sellers are taking longer to get their homes on the market. Agents speak of bidding wars, and potential buyers send personal letters with pictures of their children and pets to market themselves to sellers in a desperate attempt to secure a purchase.
Lucy Joerin, a joint managing director at Oxfordshire-based Stowhill Estates, says large family homes that took six to nine months to sell before the pandemic are now being sold within two to three weeks, with one being offered within four days of launch will.
“It’s not always the highest bid,” she says. “Many of our buyers put together résumés, almost like a sales pitch for sellers… It’s crucial that the families are involved in village life.” She says that two buyers who have been successful in recent days have made a “lifestyle pitch” – they sent letters about their families, with photos and promises that the children would go to local schools.
Jeremy Leaf, a north London estate agent, says when he was desperate to buy a particular flat 30 years ago, he also threw personal notes through the door. “Why not?” he says. “Do what you can to get a lot, especially when it’s so tight and you want a specific street or catchment area.”
Several large family homes in Dulwich, an affluent area of south London, which are on the market for between £1.2million and £2million, have just agreed sales “well above” the target price, says Groocock.
Two of them were sold within a week – a three-bedroom house priced at £1.5million had 47 viewings and 23 offers, while a five-bedroom house that was on the market for £2million had 46 viewings and 29 had offers. Some go to closed bidding – where all bidders submit bids to the agent at the same time, unaware of what competitors are willing to pay.
Around 40% of properties being marketed by Knight Frank across London are currently for sale, which is unusual. For the first time since the Covid pandemic, buyers from the Middle East are returning – with a number of bookings over the next two weeks – to look at modern apartments in Kensington and Notting Hill.
The frenzy can only be short-lived. With a deepening cost-of-living crisis and rising interest rates, while the Bank of England struggles to tame inflation, there are some who fear the housing market could go into freefall, while others believe a crash can be avoided.
This week’s jobs data showed “there are more jobs, more vacancies than unemployed, giving confidence that people can meet their payback obligations,” Leaf says.
Renters, faced with a triple whammy of soaring rents, utility bills and grocery bills, will struggle more. Monthly rents are 40% higher than they were 10 years ago and renters are feeling the full impact of rising costs, according to real estate website Rightmove, with fees rising at the fastest pace on record.
Those who could afford a home fared better. The Bank of England started raising interest rates in December and is up from 0.1% to 1% this month and more hikes are expected, but mortgages are still cheap by historical standards, brokers say.
Leaf says the speed of the housing slowdown will depend on how aggressively the Bank of England increases borrowing costs. “A correction is less likely this time around as interest rates are lower so the debt is relatively more manageable, although of course it’s still very difficult for some amid a cost of living crisis.”
Jonathan Harris, managing director of mortgage broker Forensic Property Finance, says: “The market is likely to be flat for a while. We will see a steady rise in interest rates, not massive hikes.”
With three-quarters of borrowers having fixed-rate mortgages, many people’s monthly payments are still unaffected, according to industry body UK Finance. Those looking to buy are interested in fixing mortgages typically for five years, while there’s also more interest in fixing mortgages for seven or 10 years, brokers say.
“Fixed rates have been the product of choice for some time,” says David Hollingworth of L&C Mortgages. People can fix their mortgages for five or 10 years at a similar interest rate of just under 2.5%. The situation is volatile, the lenders advertise and then collect interest on a weekly basis.
But according to Leaf, the outlook is better than it was in 2008, when the market collapsed and some properties lost 50% of their value. “Repayments, interest rates have been so low, and even those who are suffering hopefully won’t be repossessed and they won’t go into huge debt like some people have done before,” he says. “It’s different than last time.”