Blog: House prices are an increasingly complex business

James Ginley, Technical Surveying Director, e.surv

Everywhere, it seems, the press is replete with tales of expected house price falls. The impact of the mini-budget and cost-of-living crisis is without doubt still being felt, but it is noticeable that many other factors that traditionally support prices appear to have been quickly forgotten or conveniently ignored in the dash for headlines. In UK housing, old habits die hard (if they die at all) and new habits (to continue the analogy) are coming to impact how we perceive the homes in which we live.

The reality is that buying a home is a far more complex and complicated decision-making process than many of us would like to admit. Peoples’ willingness to pay may ultimately be driven by many considerations -some related to the property and others to their personal circumstances and beliefs.

So, while we all know the issues, what are the factors that are supporting prices in some areas? Well, the Census of 2021 highlighted a growing number of single dwelling households and a shortage of property to accommodate them – particularly in the south-east. It seems the housing crisis has a more localised feel than we might have thought. Of course, the highest values are in the south-east too.

But as well as a lack of supply of the right type of property, we now have increasing demand and interest in environmental value.

Britain’s homes are not standard. Our housing stock is centuries old in some cases. Our working patterns and infrastructure needs are constantly changing, creating demand currents and affecting local pricing patterns that can shift very quickly.

Understanding how the green evolution and net zero will affect property valuations is also still in its infancy. But with the built environment estimated to be responsible for around 40% of the UK’s carbon emissions, the ability to improve our homes’ energy efficiency will be make or break for the government in its pursuit of net zero by 2050.

The Royal Institution of Chartered Surveyors (RICS) published a framework last year designed to highlight the “core principles” that need to be assessed and managed during the operation of the built environment.

The penny is beginning to drop with some consumers. A couple in Walthamstow was reported this week to have raised over £113,000 to install solar panels on every house on their street. More than 30 of their neighbours will soon have solar panels installed on their houses in order to cut bills and to help with the climate crisis.

It’s likely that energy supply will become far more localised with the grid offering back up power to supplement supply when there are demand spikes or insufficient local generation. Homes’ access to reliable and local renewable energy sources will increasingly affect their desirability as fossil fuels costs get more and more expensive.

The whole energy network is going to have to change to support the transition to renewable energy, particularly because our capacity to store energy generated by wind, water and sun when it’s in abundance remains very limited.

Homes that meet the legal energy efficiency requirements and have access to cheap renewable energy sources present less financial risk for lenders, who are already carrying the risk relating to borrowers’ ability to fund the necessary renovations in their back books. They will also appeal to buyers looking for cheaper household costs and more environmentally sustainable living environments. Prices will start to pull away from older stock that presents major renovation costs.

Value is not determined by a prescribed set variables but influenced by a myriad of factors – many of which are evolving. A person’s willingness to pay a price is impacted not just by energy considerations but by many other factors (location, build-type, personal circumstances etc). Understanding the appropriate impact of these will be key to understanding the value of secured lending going forward.

James Ginley

Technical Surveying Director



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