Young and low paid workers in tourist hotspots are increasingly facing the prospect of being unable to afford to live there.
Despite falling from a record high in June, the average UK house price (£256,000) increased by 8.0% in July 2021 compared with the previous year.
House prices were rising at three times the national rate in some rural and coastal areas in July, such as Conwy in North Wales (25.0%), North Devon (22.5%) and Richmondshire in the Yorkshire Dales (21.4%), continuing a trend seen during the coronavirus (COVID-19) pandemic.
Meanwhile, the seven areas that recorded house price falls in July were all London boroughs.
House prices are increasing partly because of temporary changes to taxes paid on property purchases (including Stamp Duty in England and Northern Ireland), but they also reflect a shift in consumer preferences with growth being driven by rural and coastal areas.
Prospective home buyers are seeking more space, with prices for detached houses (9.0% growth in July) consistently rising faster than terraced houses (7.7%) or flats (6.1%).
As a result, people living in rural and coastal areas – particularly the young and those on lower incomes – are at risk of being priced out of the housing market.
This could be contributing to hospitality businesses being unable to fill vacancies, with the industry being predominant in tourist areas and containing a high proportion of young and low paid workers.
House prices increased fastest in rural and coastal areas in July
Top 10 and bottom 10 local authorities for annual house price growth, UK, July 2021
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Notes:
- Low transaction numbers can lead to volatility in house price estimates in some local authorities and London boroughs. These statistics should be used with this caveat in mind.
- The Shetland Islands and the Orkney Islands have been excluded from this chart because of small transaction volumes.
The divergence in house price growth between London and elsewhere can be seen in tourist hotspots (the local authorities with the highest number of travel and tourism businesses per resident population).
Eden, Powys, and Derbyshire Dales have all posted price rises of 10% or more in every month of 2021 so far (January to July).
While also considered tourist hotspots, City of London, City of Westminster and Camden are the only areas to have seen prices decline for those seven consecutive months.
There is some evidence of people house-hunting in rural areas, rather than in cities, because of a change in their circumstances during the pandemic, such as being able to work remotely.
In September 2020, the Opinions and Lifestyle Survey (OPN) found that 3 in 10 (29%) working adults in Great Britain had intended to continue working from home after the pandemic all or most of the time. Among those people, 12% said they had considered relocating, mostly to rural or coastal areas.
However, while there has been a general pattern of people moving from urban to rural places in recent years, we do not have any data at this stage that suggest a stronger trend during the pandemic.
Tourist hotspots outside London are seeing house prices rise sharply
Annual percentage change in house prices by local authority, January to July 2021
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Growth of tenant demand appears to be exceeding supply
UK private rents increased by 1.3% in the 12 months to August, rising to 2.0% excluding London.
The fastest rates of growth were in the East Midlands (2.7%) and the South West (2.6%), while London was the only region to record a decrease (-0.4%).
The RICS UK Residential Market Survey (PDF, 4.8MB) suggests that an imbalance between tenant demand and the supply of lettings could be contributing to the increase in rental prices.
In the three months to August 2021, RICS reported that tenant demand was accelerating while landlord instructions remained in decline.
The fall in supply of lettings was most widespread in the Midlands, the East of England and the South West.
It could be that some landlords are trying to capitalise on domestic tourism through holiday lets, leaving fewer long-term lets for prospective tenants.
This is a particular issue for those looking to rent in tourist hotspots, where rates of second home ownership are much higher than average. Research suggests that many second homes have become holiday lets during the pandemic.
Second home ownership is concentrated in tourist hotspots
Rates of second home ownership by local authority, England and Wales
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Data for second home ownership by local authority in England and Wales (XLSX, 26 KB)
Notes:
- The data cover dwellings that are liable to pay council tax.
- The England data refer to the period as of 14 September 2020; Wales data refer to the financial year ending March 2022.
People who work in tourist hotspots are generally low paid
Those who work in tourist hotspots earn less on average than people who live there.
For example, as of April 2020, Cotswold residents earned 28.7% more than people who were employed in the area. There were similar differences between the earnings of residents and workers in other tourist areas such as Derbyshire Dales (27.5%) and Allerdale (24.5%).
This is comparable with areas of Outer London such as Bexley (29.0%) and Harrow (27.3%) that are subject to the “commuter effect”, where people who earn high incomes in the city centre live on the outskirts.
In tourist hotspots, workers earn less than residents because of the types of jobs in those areas, with hospitality being the largest employer.
The median hospitality salary for a full-time employee was £22,779 per year in April 2020, which was 28% lower than the national average of £31,461.
Hospitality workers were also the most likely to be furloughed during the pandemic. On average, between 23 March 2020 and 31 July 2021, more than half of employees in hospitality were furloughed.
As a result, tourist hotspots were among the areas with the highest average furlough rates during the pandemic.
South Lakeland and Eden in the Lake District recorded the highest monthly furlough rates of anywhere in the country, at 40% and 39% respectively in June 2020.
Furlough rates tended to be higher in tourist hotspots than elsewhere
Monthly average furlough rate in selected tourist hotspots compared with the range for all areas and the UK average, June 2020 to July 2021
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Young and low paid at greatest risk of being priced out
While house prices have been rising during the pandemic, many people have seen their income fall because of furlough, reduced hours or losing their job.
The poorest fifth of workers were more likely than the richest fifth to see a drop in income in the 12 months to March 2021 (42% compared with 31%), according to recent analysis.
Data from the Opinions and Lifestyle Survey (OPN) show that young people (aged under 30) have been more likely to report reduced income than those aged over 60, but less likely to do so than 30- to 59-year-olds.
However, young people remain worse off than other age groups in terms of their overall financial situation. A third (34%) of under 30s responding to the Survey on Living Conditions (SLC) had at least some difficulty making ends meet in the year to March 2021, the highest percentage of any age group.
This has implications for the industries that tourism economies rely on, such as hospitality which is reporting record levels of job vacancies.
Nearly a third of hospitality businesses were finding vacancies difficult to fill in late August 2021 (30%), amid reports of workers being priced out of buying or renting near their job.
We do not yet know the full impact of coronavirus on housing affordability. The most recent data cover April 2020, towards the beginning of the pandemic and before the subsequent rise in house prices.
The next housing affordability release (with data up to April 2021) is due to be published in spring 2022.
There is further analysis of house price trends before and during the pandemic planned for October 2021.
Measuring the data
In this article, we define tourist hotspots as the local authorities with the highest number of travel and tourism businesses per resident population.
Using a list of travel and tourism industries, we found the average number of travel and tourism businesses (local units) in each local authority in the years 2017, 2018 and 2019, from the Inter-Departmental Business Register (IDBR).
We then divided the resident population of each local authority by the number of travel and tourism businesses to identify tourist hotspots.
The local authorities with the most travel and tourism businesses per resident population are as follows:
- City of London
- Westminster
- Isles of Scilly
- Camden
- Kensington and Chelsea
- Islington
- South Lakeland
- Hammersmith and Fulham
- Argyll and Bute
- Scarborough
- Hackney
- Derbyshire Dales
- Gwynedd
- Highland
- Eden
- Cotswold
- Richmond upon Thames
- Brighton and Hove
- Pembrokeshire
- Southwark
- Richmondshire
- Orkney Islands
- Craven
- South Hams
- Ryedale
- Ceredigion
- Cambridge
- Tower Hamlets
- Conwy
- North Devon