Demand for second homes rises against backdrop of price uncertainty

More than a quarter of homeowners expect the value of their property to remain unchanged over the next several months, underlining how some sellers will resist significant price discounts. 

Some 27% of respondents said they expect no change in the value of their property, although others believe prices will fall in the short-term, a Knight Frank survey of 450 people found. 

The even spread of responses underlines the uncertainty surrounding prices following the re-opening of the property market on 13 May. Some 22% believe prices will decline by up to 5%, 25% said the fall would be between -6% and -10% while a further 12% predicted a steeper decline. 

The economic backdrop to the UK housing market will worsen over the summer as weak GDP data for Q2 means the country is likely to enter a recession. However, the differences between this downturn and the global financial crisis in 2008/09 include the ultra-low interest rate environment, which means fewer owners will be forced to sell due to financial pressures, and the fact house prices have been subdued or falling in many parts of the country over recent years.  

Knight Frank forecasts price falls of 7% in UK markets and 5% in prime London in 2020, with most of the decline having already taken place.

“I agreed two deals last week, one at guide price and another at a discount,” said Josh Marks from Knight Frank’s St John’s Wood office. “Things are more price sensitive now but we’ve been busy with viewings and buyers who have been looking online just want to get on with things.”

The impact of the pandemic has been softened by the government’s furlough scheme and other support measures, which may explain why 56% of respondents said their spending power was unchanged or had risen (6%). 

While demand has rebounded more quickly than supply since the lockdown, the balance is likely to be restored in coming weeks as more vendors list their properties for sale. 

The number of London-based buyers in the week to 23 May was 28% higher than the five year average. Meanwhile, the number of instructions to sell remained 68% below the five-year average.

The current imbalance was underlined by Shelley Stephenson from Knight Frank’s Worcester office. “I’ve not had one buyer attempting to renegotiate the price since we opened for business again and the current scarcity of stock is helping in that respect,” she said.

Lifestyle change

Meanwhile, almost a quarter (24%) of survey respondents said the lockdown had made them more likely to purchase a second home. 

The top three most popular amenities for a new property were a large garden, outdoor space or access to land (56%), a home office or study (53%), and privacy (43%). Some 53% of respondents said they planned to work from home more often.

The number of London-based buyers looking outside the capital has increased since the UK imposed lockdown restrictions, as we reported last week.

Ed Hunt from Knight Frank’s Winchester office said there had been a “massive London influx”, with an increase in potential buyers looking for both main and secondary homes. 

“I’m currently marketing a chocolate-box cottage with a thatched roof and three-bedrooms which is a classic bolthole for those looking for a second home. These sorts of properties are attracting lots of interest.”