UK Real Estate Market and Working from Home

working from home

This article should not be considered as financial advice. Contains paid content.

In the past twenty years prices for residential property in the UK have been rising steadily. According to data from the Land Registry, average property prices went from approximately £85,000 in 2000 to £250,000 by the end of 2020. Consider that in 1977 the average house price was only £10,000 (Bank of England). Generally speaking, house prices tend to rise as the economy grows. Higher house prices are also linked to more availability to borrow money with lower interest rates.

Similarly, in Ireland house prices average at about €285,000 (Irish Times) which is equivalent to £250,000. The Irish residential real estate market saw an increase of 6% in prices and an increase in mortgage lending in 2020 alone. This trend has also been accompanied by an increase in savings and a decrease in consumer spending.

2020 marked a shift in the real estate market in the UK, as a global pandemic put a halt to many financial transactions and house prices reached a plateau.

The needs for house buyers have also changed over the course of 2020, with more and more people working from home, so having adequate space for a small office became more of a priority.

We haven’t seen a market crash like in 2008-2009 at the height of the recession, when large chunks of equity were simply wiped out. Regardless of major events worldwide, investing in bricks and mortar is still a good option.

Mortgage Numbers Are Rising

The number of approved mortgages have been on the rise (The Guardian), with factors such as stamp duty holidays and lower consumer spending as key drivers.

Spending habits moved towards saving for a deposit on a house. While analysts predict the market may slow down, house prices are still expected to grow steadily in the long term.

Demand for properties has changed to larger houses outside city centres (Bloomberg) as commuting to an office may no longer be necessary for many types of jobs.

Working From Home

Working from home, whether it’s by choice or because of other circumstances, is a great way to reduce overheads. Commuting to a workplace can be extremely expensive and there may be additional spending involved such as buying coffees and lunches, for example.

working from home

When sharing a rented flat with other people it may be a challenge to have a dedicated space to work, so in the long term buying property can address that. Parents of young children may also find it difficult to be on video conferencing calls without interruptions, and that’s where having a spare room, no matter how small, can make a difference.

Finding The Right Mortgage

Even though recessions tend to have a negative effect on house prices, driving them down, over time the market readjusts itself.

Finding a mortgage depends on affordability, bearing in mind that it is a commitment over 20-30 years. Even small differences in the debit interest rate can save large amounts of money in the long run.

You can use tools such as Mortgage Calculator to work out how much your monthly mortgage repayment will be.

For example, if you are planning to buy a house worth £200,000 with a view to repay it over the course of 30 years, you will pay (rounded figures):

  • £843 a month with a 3% debit interest rate
  • £898 a month with a 3.5% debit interest rate
  • £955 a month with a 4% debit interest rate.

A 1% difference in interest rate can save you £1,344 in a year. This can also be extremely useful if you are refinancing and want to move to a cheaper mortgage deal.

The calculator also shows the capital and debit interest repayment schedule over the years.

Using an online tool is straightforward and it’s a good starting point to see what types of mortgages are available.