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If people can work anywhere, will they want to stay living in cities?

A summary of observations from our second Future Of Cities event, which probed whether Covid-19 has changed demand for city living

Blog post published on 24 November 2021 by Jovana Lalic

On 18^th November, Centre for Cities hosted the second of three events in partnership with L&G exploring what Covid-19 means for the future of cities. The online panel discussed the future of urban living and the impact of home working on the demand for city living.

This blog outlines the key issues raised during the discussion between Dan Batterton (Senior Fund Manager, Build to Rent Fund, LGIM), Timothy Bannister (Director of Data Services Business, Rightmove), Samantha Veal (CEO of Blueprint Regeneration and joint Head of igloo Development Services) and Andrew Carter (Chief Executive, Centre for Cities).

There has been no “demise of the city”, but the pandemic has changed how we think about space

Similarly to the theme from this series’ first panel discussion, the notion of the city as a place to live has survived and flourished during the pandemic. The overall picture is that people want to stay living in cities; according to Rightmove, total demand for city properties has increased by 34 per cent for sales and 46 per cent for rental over the last two years.

However, a consequence of the pandemic has been a change in demand for living spaces. Rightmove noted three findings from their analysis of aggregated enquiries by home-movers in sales and rental markets; firstly, the significant drop in demand for house moves in March 2020 picked up very quickly and has endured throughout the last 18 months; secondly, the “what” and the “where”, regarding the types of homes people are looking for and their locations respectively, have changed and are still evolving; and finally, these market dynamics differ significantly across the country, particularly across and within cities.

The demand for properties demonstrates the trade-off between city centres and the countryside, whilst commuting belts remain popular

A common theme across the country has been the “race for space”, where people are now expecting more space within their homes (in the form of additional communal space for working), around their homes (such as balconies, gardens and roof terraces), as well as outside space in the form of green spaces, proximity to the seaside or a location in the countryside. This can be shown through changes in property type demand, where houses were in demand initially following the first lockdown in 2020, but flats have led the demand growth more recently, with 1- and 2-bedroom flats now the most popular property type (as of October 2021).

Although Rightmove’s aforementioned data notes an increase in aggregate demand for city properties, the “race for space” did lead to an increase in the proportion of city dwellers looking to move out of cities from 40 per cent to 50 per cent between October 2019 and October 2021. But this differed depending on the city, showing that local dynamics drive home-mover behaviour; for example, Manchester scored first for both sales and rentals regarding enquiries for outside of the city, compared to London as third for sales enquiries but scoring last of the UK’s 10 big cities for rentals.

The spread of enquiries shows the evolution of demand for certain locations. Before the pandemic, those interested in moving out of London were looking for properties fairly close to the capital, for example in Bristol, Brighton and Canterbury. The data for May 2020 exhibits a strong kneejerk reaction following lockdown lifting, with increased interest in coastal regions and rural areas although this has subsided in the last few months.

There has also been growth in demand for living in outer boroughs of cities, particularly when comparing January 2020 to May 2020, with Rightmove’s heatmap data showing an increase in sales enquiries outside of Manchester’s and London’s centres. This has subsided a little since for London but remains strong for Manchester, demonstrating that the commuter belt location remains popular for cities at varying levels.

Net zero and changing consumer preferences are driving supply considerations

From a supply side perspective, the challenge of reaching net zero and changing preferences means that how we think about and plan cities will likely change. The positive implications of density in cities were highlighted by L&G; amongst other reasons, infrastructure such as public transport is better able to serve dense urban environments. According to L&G, the focus should be on increasing housing supply through densifying cities rather than encouraging people into the greenbelt. Centre for Cities have written several reports on the importance of planning reform in encouraging densification which will be a key tool for cities to reduce their carbon emissions.

L&G also highlighted how buildings’ carbon footprints are increasingly appearing amongst residents’ specification prerequisites. Rightmove recognised it is still early days to say that residents are entirely driven by a potential home’s carbon footprint, however this will likely emerge as a key theme over the next few years; 58 per cent of people surveyed said the EPC rating was an important consideration for their next home, but 82 per cent said they would consider it for the home after.

People are also placing increased emphasis on the feeling of community when choosing where to live. Blueprint noted the importance of investing in social capital which paid dividends throughout the pandemic, during which people became far more reliant on their neighbours for interactions and support. Rightmove added that over 30 per cent of residents in cities prefer their homes more after the pandemic compared to before due to their local communities.

The ongoing balance between office working and home working will also have long-term implications for the supply of homes. A key challenge for providers of space will be balancing the lead time needed to design and build a space with the unknowns around whether working from home will remain a norm in two years’ time, and what that means for built environments.

Going forward, the importance of cities will endure, but what that looks like in practice remains unclear

The enduring legacy of the pandemic will be one of reinvention for cities. Rightmove noted that we should continue to look at the data and early indicators to gauge the long-term impact of the pandemic on the property market. For example, cities are more important now than they ever were for younger age groups in particular, given their valuing of cities’ cultural and social offerings whilst their desires for reduced commuting times have increased throughout the pandemic. This will have implications for space supply and demand over the longer term.