Before Covid-19, working from home was the exception; now that it’s mainstream, we have re-evaluated what we want from our houses.
Working from home has upended the traditional idea of having to buy a house in or near a city for job opportunities and higher salaries. Pre-Covid, the only decision to make was whether to buy a smaller house close to your place of work or a bigger house further away with a longer commute.
Now these boundaries are blurred; working from home makes long distances from the office feasible, widening the choice of where to live and offering the opportunity to find better value for money.
We look at the influence of the pandemic, our changing view of `location,’ and working from home’s effects on the broader property industry.
The influence of the pandemic
Covid-19 caused an unprecedented rise in the number of people working from home, and the long-term acceptance of hybrid work patterns.
According to the Office for National Statistics, the number of people working from home in the UK more than doubled from 4.7 million to 9.9 million people between October to December 2019 and January to March 2022. And while we’ve put Covid behind us, working from home is one reminder of it that’s here to stay.
Changing demand in the housing market
This sudden increase in remote working led to a surge in demand for larger homes with dedicated office spaces and outdoor areas. The demand for properties with gardens, balconies, or terraces increased by 68% in the first half of 2021 compared to the same period in 2019. There has been a significant increase in people wanting properties in suburban and rural areas, as people seek larger homes further from major centres.
Figures from the Office for National Statistics from spring 2022, when there was no longer guidance to work from home, revealed that 38% of working adults worked from home at some point over the past week, as opposed to 12% reporting the same pre-pandemic.
In February 2022, 84% of workers who had to work from home during Covid, planned to return to hybrid working in the future; just 8% planned to return full-time to the office, down from 13% in April 2021.
According to Zoopla’s research in spring 2022, 44% of city dwellers wanted to move to a more rural area. For many people, the combination of isolated lockdowns and confined spaces led to a rethink of how they lived their lives.
The `Race for space’
As people were forced to work from home during the pandemic, many realised that they were short of space. Demand rose for houses with room for a home office that could be separated from the rest of the house, or a section of living space that could be adapted for remote working. This created a demand for larger properties with an extra bedroom or study, and the `race for space’ concept took hold.
One direct result was that flats lost their popularity; they fell behind houses in terms of price increases, although they are starting to recover now as people have returned to the cities. Another result was rapidly rising house prices.
The changing mood renewed interest in countryside and coastal properties, and demand for gardens was boosted by the record temperatures of the summer of 2022: house prices began to rocket for homes with a good garden or proximity to a park.
A new awareness of `location’
Covid-19 changed the concept of `location, location, location,’ as people are no longer restricted to living near their place of work. Not having to go to the office five days a week makes a longer commute viable and enables a greater location range. During and post-pandemic, there was a move from expensive city centres to larger houses in the suburbs or to rural areas as people looked for better value for money and an improved lifestyle. This led to house prices rising in areas surrounding cities and large towns, and an extension of the London commuter zone.
This changing landscape generally benefits the higher paid who will move if they can work from home, whereas lower-paid employees who can’t work from home continue to buy in cities, along with young professionals who prefer to live there, keeping prices up.
Desirable features in the current housing market
To make the move from urban areas achievable, a property needs to have specific features such as a fast and reliable broadband connection, room for an office, and outdoor space. Good transport connections and day-to-day amenities are also desirable features making a location attractive and boosting property prices there.
Office and commercial property
With many companies adopting a flexible, hybrid work model, or allowing employees to work from home permanently, there’s been a decrease in demand for traditional office space, although workers are returning to their desks in some industries.
The Chancellor, Jeremy Hunt, wants people to return to the office as a `default option,’ fearing a loss of creativity and collaboration between staff. There’s also a belief that colleagues work best together in an office situation and that it’s a better environment from a mental health and well-being viewpoint. The way we use offices is being reassessed. New offices must provide a different way of working; established offices may be redefined and refitted to be more flexible.
Commercial properties may also need to be repurposed as cities become mixed-use destinations offering employment, retail, and leisure facilities as well as a thriving nighttime economy: this changing landscape offers opportunities for change and new uses.
The building industry
Working from home is also leading to innovation in the building industry, as developers need to build to suit people’s requirements for office space in their homes. The industry must adapt and provide solutions to meet people’s needs.
The Private Rented Sector
The work from home concept has also provided opportunities for tenants – they too can move further from their jobs, they need good broadband and want outside space even if it’s a patio or balcony, and landlords need to adjust their offer to attract long-term tenants. The shortage of properties to rent shows no signs of abating. In June 2023, Zoopla stated that rental prices are the least affordable for a decade. Supply is 20-40% below pre-pandemic levels which is driving up rental prices, forcing many to pay more than 28% of their disposable income before tax on rent.
Build to rent
This sector is set to benefit from the work from home trend as it’s already providing dedicated, well-equipped working areas away from household distractions, which are likely to be popular with renters going forward.
The pandemic has changed attitudes for the long term and provided the opportunity to live somewhere cheaper while keeping the same job. It has made us adapt to remote work far more quickly than we would have done. Working from home is now a reality for many people, it has affected house prices and will continue to do so. Bigger homes with plenty of rooms and outdoor space in desirable rural areas are sought after and command premium prices. It has not led to a corresponding drop in house prices in towns and cities due to the ongoing shortage of housing of all types in the UK, and because some people cannot work from home.
UK house prices
For many people, working from home has improved their quality of life. It has also led to rising house prices making a bigger home unaffordable for many, adding to the levels of housing inequality in the UK. With a growing population and delays in getting more houses of all types built, house prices seem unlikely to change much from their current high levels, whether they’re in the town or the country.
Rising interest rates will make it harder for first time buyers to get onto the housing ladder, and the outlook for the housing market may well remain subdued for some months as household finances are squeezed.
Working from home has changed the way we work for the foreseeable future, and it’s also altered our requirements from our homes. The winners are those who can afford a bigger home further from the office; the losers are those who can’t due to their job restrictions.
Overall, the move to remote working has changed the priorities of UK house buyers and renters, and this is likely to continue as hybrid working becomes the norm.