Unless you are buying or selling your home, chances are you don’t know exactly what is going on with the real estate market. Most of us don’t spend our days studying the changing price of property unless we practically need the information. For this reason, you may not know that property in the UK is booming.
This might surprise you, as people are poorer than they were before the pandemic. In fact, millions are struggling to pay rent, let alone buy homes at inflated costs. Many expected the price of housing to decrease, with low demand as few people actively tried to move.
However, the average price of homes in the UK has increased by £25,000 in the past year! And this is not just due to prices increasing in London. Hertfordshire property has increased in price at a high rate, as has been the case across the UK.
Why is Hertfordshire property in high demand at the end of a devastating pandemic? Are that many people really trying to buy homes as 2021 draws to an end?
Here’s what you need to know.
Global real estate boom
If you look at real estate prices across the world, you will notice that this trend is not unique to the UK. On the contrary, the cost of housing in parts of the US has risen by more than $100,000.
As is the case in the UK, the price increases are not limited to the most crowded areas. Even homes in spacious cities are increasing in price, with no end to the trend in sight. It has been going on for over a year, and most experts are not too concerned about a major crash.
The reason for this becomes more apparent as you look deeper into the context.
Supply or demand?
The property market is more immediately impacted by supply and demand than most other industries. When supply exceeds demand, buyers hold all the power. When demand exceeds supply, the sellers take their turn on top.
So, it should be unsurprising that demand currently exceeds supply. However, what is less obvious to casual observers is that this is not because of an increase in demand, but rather a decrease in supply.
A number of factors have led to a relative shortage of housing. Firstly, the pandemic has kept people in place for the past eighteen months or so. People who would have otherwise sold their homes chose to stay put. Many of these people later found themselves in no position to move home.
Secondly, construction decreased significantly. At certain points in the pandemic, construction in some areas came to a complete halt. Far fewer homes were built than in non-pandemic times. Construction is still far behind normal levels.
This leaves us in a position with few homes on the market. As demand has increased with the financial impacts of the pandemic wearing off for some, there has simply not been enough supply. Sellers have been able to charge record high prices for homes that were tens of thousands of pounds cheaper a year ago.
Is this the case in Hertfordshire?
The question Hertfordshire locals will have is whether this is the case here. Trends show that Hertfordshire housing prices are also at a high, with the average property being sold at £515,000 over the past year. Hertfordshire housing is generally costlier than other parts of the country, but this is as much as 9% more than the previous year. That amounts to over £41,000 more!
In other words, housing prices are rising in Hertfordshire at an even higher rate than throughout the rest of the country. This certainly makes a case that the same phenomenon is happening here as everywhere else.
Yet there is possibly more to the story with Hertfordshire property, and that comes down to where the demand comes from.
In Hertfordshire, as in the rest of the country, supply is down. However, this is not the only factor driving the price up. Demand seems to be up as well.
Increased demand in Hertfordshire may be attributed to foreign investment. With the world returning to normal, foreign individuals and companies are once again setting their sights on the potential of Hertfordshire, both as a place to live and as an area for investment.
This is true of individuals living as expats as well. Companies are sending expats over again, with the ability to move more freely facilitating international business. While expats rarely buy homes themselves, companies with a long-term interest in having employees here buy homes that will remain in their possession when one expat leaves the role and gives way to another.
There are a fair amount of foreign companies that have set up branches in Hertfordshire. These companies employ British workers as well as workers from their countries of origin. If we look at some of the local companies premised here, we can see that there is a global appeal in Hertfordshire real estate.
Currency Index and Foremost Currency Group are two currency brokerages that are headquartered in Hertfordshire. These international money transfer companies are used by people around the world to send money abroad. Whether they are bringing money into or sending money out of the UK, they require a currency brokerage to do so at the cheapest price.
It is no coincidence that these companies set up shop in Hertfordshire. Rather, it points to the fact that Hertfordshire locals think internationally. This is unsurprising, considering the number of foreign nationals who come through Hertfordshire during normal years.
It is also evident in just how active a company like Smart Currency Exchange is in Hertfordshire. Smart Currency Exchange has its headquarters in London, but facilitates a lot of international transfers to and from Hertfordshire.
All of this speaks to the presence of foreign investors in UK property, specifically in places like Hertfordshire.
The role of cheap currency exchange
The presence of currency brokerages may be a factor that attracts foreign investors in UK property. Money transfer companies make foreign investment significantly cheaper. They take minimal fees, especially in comparison to the big banks. Furthermore, they provide a fair foreign exchange rate. Most banks provide a foreign exchange rate inferior to the one you would find in a Google search, essentially hiding an extra fee on a transfer on which they have already taken commission.
It helps that the pound has still not recovered to the levels it was at before the Brexit vote. Foreign investors in the EU can buy property in the UK at lower prices because of the exchange rate. With money transfer companies facilitating this, they save more money than they could have hoped for pre-2016.
Is this a good thing?
Of course, foreign investment is not always a good thing, especially if it is inflating property prices for locals. Hertfordshire property prices are booming, which is great if you are trying to sell your home, but troubling if you are trying to put down roots.
The question, however, is this. Is there organic local demand for housing in Hertfordshire? As we have mentioned, while demand exceeds supply throughout the UK, this is largely because of supply issues. Few houses have been built and few homeowners are choosing to sell.
Therefore, the presence of foreign investors is unlikely to prove troublesome for locals. Hertfordshire residents are generally happy to stay put for now, and the supply shortage will not last forever. Eventually, supply will match demand and prices will come down.
Should I sell my house?
As a homeowner in Hertfordshire, you may be wondering whether this is a good time to sell your house. Homes are going for record prices. You could get a major return on investment by cashing in now. If prices do go down in the near future, a few months of renting property may be worth it.
The problem is that we are in uncharted territory. The past year and a half have been consistently called “unprecedented.” With this in mind, it becomes evident that no one can say with all that much confidence what will happen next. It is possible that housing prices will crash. It is possible that prices will settle. But it is also possible that prices will stay the same or even continue to rise.
If you do sell your home and prices continue to rise, you will end up having to splash out more money on a property of the same size in the same location. It is best to wait and see what happens, rather than trying to cash in on something we don’t fully understand.
Hertfordshire housing prices are rising, as is the case across the UK. This is in large part due to a drop in supply over the course of the pandemic, as well as foreign investment increasing demand.
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