OPINION: Why housebuilders shouldn’t predict the ‘new normal’

Alpa Bhakta, CEO of Butterfield Mortgages Limited, explains why predicting the ‘new normal’ is dangerous while in the midst of the pandemic.

There is a general acceptance across society that life will not revert to exactly how it was before the pandemic, even when the threat of Covid-19 has long passed. This is best reflected in the widespread use of the term ‘new normal’; the way things will come to be.

The property sector has not been immune from such speculation. Commentators from across the industry have offered their perspective on the long-term trends and changes that will outlive the Covid crisis.

However, making such predictions is not only difficult, but also dangerous. It involves pre-empting the sentiment of consumers, businesses and investors at a time of great upheaval. And when we explore some of the most common predictions about the so-called ‘new normal’, one can see why this practice is so problematic.

Escape to the country and demise of commercial property

One of the most notable property market trends during the pandemic has been the shifting preferences of homebuyers. This has typically come in two forms: the demand for properties with more space and increased interest in rural areas.

A recent report from Rightmove, for instance, found that Cornwall had overtaken London as the most popular search location among prospective buyers on the platform. Meanwhile, Cornwall and Devon between them shared six of the ten most searched-for areas in March 2021. Meanwhile, separate evidence shows homebuyers are increasingly favouring properties with gardens and rooms that can be used as a home office.

These shifts are easy to understand. For instance, remote working has become commonplace, with a study from NerdWallet in March 2021 finding that two-thirds (67%) of UK businesses had switched to either part-time or full-time remote working in the past year.

At the same time, the appeal of living in urban areas has naturally declined during periods of lockdowns. Shops, gyms, pubs, restaurants, theatres, galleries and museums have all been forced to close.

The aforementioned rise in remote working has also had significant consequences on the commercial real estate sector – this has been a second key trend during the pandemic. Offices have proven more challenging to let, while some organisations have downsized their workspaces or abandoned them altogether.

We are still in the midst of the pandemic

The trends are plain to see. The problem, however, is taking these Covid-related trends and applying them to the post-pandemic landscape dubbed the ‘new normal’.

Ultimately, we are still very much in the midst of the pandemic. Lockdown rules are slowly being peeled away, but heavy restrictions remain. Many hospitality and leisure venues remain closed; people are still encouraged to work from home if possible; and international travel is extremely difficult.

Given the lack of freedom afforded to consumers and businesses, assuming trends formed during the Covid-19 crisis will continue afterwards is inherently problematic. The exodus of homebuyers to the country, like the struggles of the commercial real estate sector, are predominantly the result of the social distancing rules enforced over the past 13 months – when such rules fully relax, society re-opens and people regain the power to make choices about where they go and what they do, there is no way of predicting what path they will take.

This is not to say the pandemic will not result in long-term changes, but simply that we do not know exactly what form said changes will take. So, for now, predicting the ‘new normal’ is a proverbial fool’s errand.

At Butterfield Mortgages, we are focused on remaining responsive to the demands of clients and movements within the property market. For us, a diligent approach based on tangible factors remains of utmost importance – of course we monitor market trends with interest, but we are also careful not to make assertions on what a new normal will look like while still in the midst of the pandemic.

Alpa Bhakta is the CEO of Butterfield Mortgages Limited. Part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited. Butterfield Mortgages Limited is a London-based prime property mortgage provider with a particular focus on the needs of UK and international HNWIs.