The latest Prime Country House Index from Knight Frank shows prices dropped 0.7% in the second quarter of 2011 and this pushed the annual growth rate into negative territory of -1.4% for the first time since the end of 2009.
The strongest market remains the £1 million to £3 million sector in south east and south west of England, which has seen price growth of 10% since the low in the middle of 2009.
And there are early indications that demand from London may begin to place upward pressure on country prices. With 20% year on year growth in buyer registrations in June, London prices are continuing to soar, with 34% growth in prices for the capital’s best addresses over the last year.
Knight Frank confirms its full year prime country house price forecast for 2011. It expects 2% growth in prices for properties worth less than £1 million and more than £5 million. Prices for houses valued at between £1m and £5m are expected to remain flat.
‘The latest results confirm that the market outside of London is still struggling to build momentum. Prices have now slipped by 1.4% over the past year, having previously bounced back in late 2009 and early 2010,’ said Liam Bailey, Knight Frank’s head of residential research.
‘The London effect, 34% price growth in a little over two years, has so far not had a huge impact on the country house market. Only the £1 million to £3 million price bracket in southern England has seen double digit growth (10%) from the market nadir in June 2009, with the wider country house market only rising by 6.4% over this period,’ he explained.
But he points out that despite this performance, there are indications that the market is seeing some improved performance. ‘More realistic pricing by vendors has seen the asking to achieved price ratio rise from 92% in January to 97% in June. Again, this more realistic stance from vendors has reduced the average time taken to sell a prime country house property by 23% over the past year,’ said Bailey.
‘Supply has risen, with stock volumes 33% higher in June compared with the same time a year earlier, and new instructions from vendors have risen by around 27% over the same period. Reassuringly, at the same time, demand has risen with a 20% year on year rise in new buyer registrations in June.
‘Our view is that prices are likely to stabilise at current levels and that there is scope for some limited price growth across the sector in the second half of 2011. This means that prices would be 1% higher overall in 2011, with a 2% rise in values sub £1 million and above £5 million, but with values unchanged in the £1 million to £5 million sector,’ he added.
Rupert Sweeting, Knight Frank’s head of country house sales, believes that the ripple effect from London is just beginning to reach the Home Counties where, after a slow start to the year, sales activity is rising. ‘A notable change is the beginning of international interest in the £3 million to £5 million sector, especially from Eastern European buyers. We are also seeing buyers from China starting to look at investing in this region,’ he said.
‘Another area of strong activity is the waterfront market in the West Country, where there have been a number of sales to buyers looking to invest in holiday homes. This suggests that the discretionary buyer, who views a holiday home as not only an asset/investment, but as somewhere to enjoy, is back,’ he explained.
‘Generally, the market is still particularly price sensitive. But if the price is right, a house will sell within six weeks of coming to the market,’ he added.
