Covid-19 is a global health emergency, but its impact on our lives extends far past just our health. Certainly, whilst the younger generation may not have been at the greatest risk of contracting the virus, we were affected in a multitude of other ways.
One of the most salient is how it has exacerbated already bleak prospects of getting on the property ladder. We will take a look at the situation before and after Covid-19, and look forward to how the pandemic affected the pounds and pennies of the nation’s young generation.
Pre-pandemic
The Office For National Statistics (ONS) publishes their UK House Price Index report every month, which is a report that analyses the trends in the housing market and where possible attributes a cause. February 2020 was the last available report before the country first went into lockdown in March of 2020. Granted, the virus had been present but they insist that “... this publication has been largely unaffected”.
The ONS reported that there was a slight decrease in house prices of 1.1% in February from January. While this may seem cause for celebration, I would not recommend planning your housewarming yet. Unfortunately, the prices of properties generally increased throughout every single country in the UK: 0.8% in England to £246,000, 3,4% in Scotland to £151,000 and 2.5% in Northern Ireland to £140,000. The East Of England was the only exception to this as this region experienced negative growth of -1.0%. So, whilst house prices may be decreasing this does not necessarily make them any more attainable.
This is all to say the prospects for our generation to get on the property ladder was bleak even before COVID-19. UK property prices were actually at their highest rate since the Financial Crisis (2007), at £239,753.
So, what impact did the pandemic have on all this?
Post-pandemic
Although we are not out of the woods yet, it certainly appears that the tide is turning, at least within the UK.
Which? reports house price growth is likely to slow down this year as the property market calms down. 2021 saw the market not just survive whilst many other sectors struggled to do so, but actually thrive! The Land Registry reports that this led to price increases of as much as 10%, to an average price of £270,708.
This was caused by a multitude of factors, all of which have contributed to higher demand but with lower supply. This can be attributed to three salient factors; stamp duty cuts, the market and the construction industry. Firstly, in July 2020 the government had announced a cut to stamp duty for prospective property buyers. Until 31 March 2021, the first £500,000 of a purchase were exempt from paying stamp duty. This incentivised buyers which would lead to increased demand as they clamoured to save up to £15,000. This would be extended a subsequent two times, first to 30 June 2021 and then to 30 September 2021. Second, the market was closed for seven weeks which stopped buying and selling during Spring 2020. So, in May when it reopened there was demand from both regular buyers and those in the backlog. Thirdly, the construction industry slowed during the first lockdown and it dropped to as low as just 11%.
Younger buyers are increasingly looking for properties with more space, gardens, and are leaving the cities for more coastal or rural regions,, which is now being dubbed by market analysts as a so-called 'race for space' in England. Even for those of us who are not looking for a house are becoming more selective with their flat needs. According to SpareRoom, renters are looking for qualities like compassion in their prospective flatmates.
Covid-19 has not just driven up prices but shone a spotlight on the importance of housing for people. The Health Foundation found that our housing can affect both our physical and mental wellbeing alike, so not being able to get on the property ladder is far more than an economic issue – yet its only getting harder.
Looking forward
The news paints a confusing picture of what our generation can expect when looking towards the future.
The bad news is that inflation is at its highest point in thirty years, rising to as high as 5.4%. This means that prices are rising exponentially and people’s wages simply cannot keep up the pace. In essence, money does not go as far and there is a drop in ‘real’ wages.
When £50,000 only buys you this then you know that there is a serious problem in your housing market – one which even Kirsty Allsop’s novel advice of cancelling your gym membership and streaming services cannot help.
This can be attributed predominantly to domestic fuel price hikes affecting businesses, who pass it on to us. Robert Gardener (Nationwide Chief Economist) explains what all this means for the housing market; "[prices] outstripped earnings growth by a wide margin since the pandemic struck".
Andrew Bailey (Bank Of England Boss) predicts that this squeeze may last until next year, at the least; "we're going to start coming out of it in 2023, and two years from now, we expect inflation back to a more stable position".
It’s not all bad news, though. Halifax reports that despite record high prices and affordability plummeting, this will slow “considerably” – England recorded a lowest monthly price increase in January 2022 (0.3%) since June 2021.
The economy as a whole may have suffered towards the tail end of last year but has reported growth of 7.5% on average in 2021, the highest rate since WW2.
Us young people will no doubt have a hard time getting our feet on the property ladder and not slipping, but with the above signs, optimism and a little bit of luck we will all hopefully have a bit of a better grip. Yet, even then it will remain harder than ever before for our generation to put a roof over our own heads; something which is indicative of a much larger problem in the property market throughout the UK.
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