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Abstract:

CEP Covid-19 analysis
The pandemic and the housing market: a British story
Paul Cheshire, Christian A. L. Hilber and Olivier Schöni
March 2021
Paper No' CEPCOVID-19-020:
Full Paper (pdf)

Tags: covid-19

When Covid-19 struck, the British housing market went into free-fall. Land Registry data show prices, transactions and construction all tumbled. But demand was boosted both by the general measures taken to support the economy and specific housing market actions such as the Stamp Duty Land Tax holiday. Given the endemic lack of housing supply, by November prices had surged to an all time high. As widely discussed, the demand for home working gave a particular boost to the price of larger houses. Less remarked was that the biggest price increases were for such houses very close to the centre of London, although prices also increased up to 25 miles out. Prices for flats fell everywhere. People who rent and work in central areas were least protected from the economic impact, so rents there fell. The analysis suggests, as temporary boosts end and the costs of Covid-19 and Brexit finally come to be paid, there will be a significant housing market correction, especially in London and its wider region. Because incomes will also be lower this will not make housing more affordable. In the long term there will be a recovery, probably led by London, and while some of the living and working innovations induced by Covid-19 will stick, cities will adapt and reassert their dominance in our patterns of life.