Our Thoughts
Wed, 15/02/2023 - 12:00
· 3 min read

Economic Living and Working from Home Driving Demand from the Public

Ipsos research shows the public is in a pessimistic mood fuelled by the cost-of-living and energy crisis, housing and sustainability worries. How will this shape behaviour and property trends in 2023?

Taking residential first, industry data make concerns about housing understandable.

There has been an undersupply of about 100,000 homes per year for around 20 years while the population has grown and immigration has increased. The rise in interest rates and removal of Help-to-Buy makes buying a home more difficult, resulting in a shift in the market.

Andrew Screen, Head of Residential Capital Markets, BNP Paribas Real Estate UK, says: “Interest rates going up is clearly moving people away from the buying sector into the rental. Demand for rental accommodation has gone up by 45% in the past 12 months, and supply has gone down by 40%.”

This has impacted rents, which in the UK have risen by an average of 12% in the past year. In London, rent inflation for new listings is 17%. Screen says residential rents will continue to rise this year, and predicts an increase of between 5% and 10%.

With housing affordability stretched, the trend will be more people sharing accommodation, for example, two income earners living in a one-bedroom home or 3-4 income earners sharing a two-bed.

Build-to-rent stock has understandably attracted the attention of real estate investors and funds. However, the “economic event” at the end of Q3 sparked by then Prime Minister Liz Truss’ budget put the investment market into what Screen describes as a “financial state of suspended animation”. The money didn’t disappear, he explains, it just wasn’t moving.

This year the market has opened up again with strong investor interest in the sector as there is a little more certainty around what will happen to interest rates and inflation. Screen says there are a lot of deal negotiations underway: “We’re looking at many transactions closing probably the third and fourth quarter of this year.”

Where people want to live will, in part, be influenced by the cost-of-living crisis and the ability to work from home. Ben Page, Chief Executive of Ipsos, says: “I do think that the taboo against remote working has been broken, and you can't put the genie back in the bottle.”

Cheaper suburban and regional locations will become more attractive, particularly if fewer days are spent commuting.

Will there be a rise in hub offices to accommodate the change in working practices?

Gail Meakin, Director of Projects and Facilities Management, the European Bank for Reconstruction and Development (EBRD), says: “I think it depends on the organisation. You have hybrid working, but I think it's also about where you attract the talent you want.”

She cites London as an example where the opportunity to socialise and network may be a big draw for some employees and assuming one size fits all might not be the best approach.  

While not the sole drivers for consumer behaviour in 2023, affordability, living more economically and hybrid working will influence decisions and demand for property. 

Andrew Screen, Ben Page and Gail Meakin were speaking at BNP Paribas Real Estate UK’s Capitalise event.

Economic Living and Working from Home Driving Demand from the Public