Slow sales, hot lettings
With an early election on the horizon, the next 12 months could bring significant changes to Cambridge’s housing market. Experts weigh in on what to expect
Words Emma Magnus
After a tough 2023, forecasters began the year more optimistic about Cambridge’s property market. It would become more buoyant – a report from Savills suggested – with the city’s growing tech and science industries attracting buyers and investors.
But in May, prime minister Rishi Sunak announced that this year’s general election would take place on 4 July, much sooner than anticipated and casting a new cloud of uncertainty into otherwise brightening skies. So, what now?
Slow sales
An election is unlikely to improve the number of property transactions – which have been in decline for the last decade according to HM Land Registry figures – and continued to drop this year. “There has been a massive reduction in the total number of transactions,” notes Rob Price, director of Belvoir. “It’s a chicken-and-egg situation; if you’re not selling, you’re probably not looking to buy either.”
“It’s been challenging,” confirms Alex Bloxham, head of residential lettings at Bidwells. “It’s a real buyer’s market at the moment. Generally speaking, values are about 10% down on last year. We’re still selling, but the sales team are working harder for those deals.”
To Andrew Bush, managing director of Bush & Co, the rising cost of living is partly responsible for the decrease in the number of transactions. “The normal cost of life has gone up, so the number of people moving is not as high as it used to be.” Bush found that properties valued above £1 million are slower to sell, while demand is being driven by three-bedroom family homes priced between £500,000 and £800,000.
Most, he states, are purchased by owner-occupiers in their 40s, usually up or downsizing from elsewhere in the city. They are looking for proximity to schools, work and facilities. As a result, Andrew says he has seen prices jump between 5% and 7% on three-bedroom houses this year, which he expects to continue.
“We’re at a watershed moment in the marketplace. With the election, we don’t know what the governing parties will do. For us, the most important factor is seeing an interest rate drop; money will get cheaper.” Lower borrowing rates, he anticipates, will in turn push house prices up. “I have said to people: ‘Get in as soon as you can – prior to interest rates going down – because capital values will rise.’”
Until then, uncertainty surrounding the election is likely to further slow down the sales market. Alex expects some buyers to be more cautious about making offers, while those in a position to delay their move – up-sizers, for example – might sit tight for a little bit longer, until they know where the land lies.
“It’s common for the sales market to slow down prior to an election,” adds Stephanie McMahon, research director for Bidwells, who says an early election could be a positive thing. “If the election was in October or November, as originally touted, we would have expected the sales market to have slowed down for longer. Because it’s come early, the autumn market (one of the big sales pushes) won’t be impacted. We can expect more clarity more quickly.”
‘Exceptionally busy’ lettings
But while sales remain slow, the lettings market is red hot. “Lettings is exceptionally busy,” surmises Alex. “Quite often, that goes hand in hand; if you have a busy market on the rentals side, there can be
a downturn on sales.”
As per Savills’ February report, 31% of households in Cambridge are renting – almost double the England average of 19%. This is partly due to the city’s employment market – notably, its growing science and technology sectors – which has increased Cambridge’s population by 17.6% between 2011 and 2021. This, again, is well above the England average of 6.6%.
Bidwells’ Q1 rental report notes that 63% of renters work in science, tech and innovation. One- and two-bedroom flats are most in demand, experiencing the biggest annual spike (10.1%) in prices. “It is highly competitive right now,” highlights Alex. “There’s not enough rental stock. The demand is outweighing the supply.”
The average rent was £1,642 in April – a 7.6% increase over the same time last year, according to the ONS. Alex reckons it is common for tenants to bid above the asking price – something set to continue. “The demand levels will not change.”
“We’ve got multiple applicants for every property,” adds Rob. “I’ve never seen so many landlords increase their rents as much as they have in the last 18 months.” Most renters, he stresses, are younger than in the surrounding areas. “People cannot afford to buy, so they have to rent; it’s very difficult for young people in Cambridge.”
Rob believes the situation could be exacerbated by the outcome of the election. “Supply and demand are out of kilter, and I don’t see that reversing any time soon. Successive governments making bad choices have led to this, and it will take years – possibly decades – to reverse. Landlords don’t want to be there any more, and they’re not buying as much as before.”
While capital growth for investors remains high, Rob is concerned that potential changes to capital gains tax and rental reform, for example, could discourage investment buyers and damage the private rental sector. “They want to make the rental market safer and better-quality for tenants, and I agree. But the best way to drive up standards is competition: supply and demand.”
Rob welcomes potential leasehold reforms, which will allow lease extensions of up to 990 years and make improvements to transparency over service charges. This, he supposes, will help to encourage the sales of leasehold flats. “That will bring benefits for everyone.”
Looking forwards
There are also other sources of optimism. Cambridge’s development and enduring popularity as a place to live will continue to fuel house price growth. The Grafton Centre – which earlier this year secured planning permission from Cambridge City Council to be converted into a laboratory and office space for life science and tech companies – will draw more people to the area. Housebuilding and a new build-to-rent development in Eddington may help to ease the supply shortage, declares Alex.
Agents are hopeful the Bank of England will cut interest rates, forecasted for August or September. “That’s going to fire the market up,” points out Andrew. “There’s a pent-up supply and demand that is waiting for an interest rate reduction.”
“Q3 is going to be a better time. I think we are going to see more activity and confidence,” reports Alex. “Once the election is over, people will at least have some certainty, in whatever direction that might be.”
Until then, the market must weather some uncertainty. “We have no idea where we’re going,” concludes Andrew. “I threw my crystal ball out in 1988 when we had a crash.” Rob agrees: “It’s going to be an interesting 12 months.”
