The new normal – be wary of bold predictions during such uncertain times
Alpa Bhakta, CEO, Butterfield Mortgages Limited
Working from home is the new normal. Pandemics are the new normal. Wearing masks in public is the new normal.
The phrase “new normal” has become a part of our everyday lexicon over the past 12 months. Commentators across all industries have been quick to assess which trends, started or catalysed by COVID-19, will remain in place long after the pandemic has passed.
However, such predictions are often problematic. This is particularly true in the property market, where a number of prevalent short-term trends must be understood within the very unique context of the last year, rather than assuming they are permanent features.
An exodus to the countryside?
There are two significant trends that have attracted a great deal of analysis within the real estate sector since the UK first entered lockdown in March 2020. This is the rise in the number of homebuyers searching for properties in rural areas.
For example, a recent report from Rightmove showed that Cornwall had overtaken London as the most popular search location among prospective buyers on the platform. Further, Cornwall and Devon shared six of the ten most searched-for areas in March 2021.
There are two interlinked factors at play here. On the one hand, remote working has become the norm for anyone who is not a key worker – whereas only 5% of UK adults in full-time employment would regularly working remotely before the pandemic, in late 2020 this figure reached around 50%, according to the Office for National Statistics.
On the other hand, high streets and city centres have been forced to close for large portions of the past year. Shops, gyms, pubs, restaurants, theatres, galleries and museums – all have been shut.
The closure of leisure, retail and hospitality venues, along with the rise in remote working, means that the appeal of urban living has diminished for many people since the onset of the pandemic. Instead, evidence points towards many buyers favouring properties with more space (larger garden and spare rooms that can be used as a home office) and closer to family. In the midst of the pandemic, such a mindset among homebuyers is easy to understand.
However, lockdown restrictions are gradually being eased across the UK and high streets are opening up. Pubs and restaurants can begin welcoming customers again, while socialising both inside and outside is going to become possible in larger groups.
As these changes take place, we must monitor how they impact the property market. After all, it would be dangerous to assume that homebuyer behaviour during periods of strict social distancing rules and enforced remote working will remain the same as when the COVID-related measures are peeled away.
Wait for cities to reopen
The second trend attracting a lot of attention is the plight of the commercial real estate sector. As mentioned, remote working has become the norm during the pandemic, with offices across the UK sitting empty.
Some have predicted that remote working is here to stay and, therefore, commercial premises are essentially going to be left derelict. Again, such bold predictions about the state of the property market after the pandemic seem a little hasty.
For large periods since March 2020, the UK Government has strongly discouraged people from commuting to the office. And there is no questioning that many employers and employees have enjoyed the various benefits that remote working affords. But it is still much too soon to suggest that office working is a thing of the past.
KPMG’s recent 2021 CEO Outlook Pulse Survey indicated that only 17% of chief executives plan to reduce office space, compared to more than two-thirds (69%) who said they planned to do so when surveyed in August 2020. Already there is a significant shift in mindset. Indeed, a hybrid model of on-site and at-home working seems to be favoured by most managers.
Ultimately, we are still combatting and coming to terms with the unique challenges posed by the pandemic. Lockdown restrictions are still in place and the COVID-19 crisis rages on around the world. So, making predictions about the new normal and how the property market will look in the coming months and years is extremely difficult.
What will the fate of local high streets be over the coming 12 months? What balances will organisations strike between office and remote working? Will homebuyer demand for rural properties remain as high when cities spark back into life? And how will the property market as a whole respond when the stamp duty holiday expires on 30 June?
No one knows the answers to these questions with any great certainty. And that is why it is risky to extrapolate recent short-term trends and assert that they are indicative of a “new normal”, particularly when we consider that so much of our day-to-day lives over the past year have been shaped by rules and regulations that are out of our control.
At Butterfield Mortgages, we are focused on remaining responsive to the demands of clients and movements within the property market. For us, a diligent approach based on tangible factors remains of utmost importance – of course we monitor market trends with interest, but we are also careful not to make assertions on what a “new normal” will look like while still in the midst of the pandemic.
Alpa Bhakta is the CEO of Butterfield Mortgages Limited. Part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited. Butterfield Mortgages Limited is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNWIs.