Its index covering the third quarter of the year shows that prices fell by 1.2% contributi9ng to an annual fall of 1.7%. But despite recent falls prices are still up 5% on the post credit crunch low in June 2009. The most resilient part of the sector in the past year has been the country cottage market which has only seen a 0.7% fall in prices in the last 12 months.
A greater reliance on domestic buyers and the domestic economy has resulted in the prime country house market underperforming, according to Liam Bailey, head of residential research at Knight Frank.
At a regional level country houses in the south east of England have seen the strongest performance, with prices higher by 0.4% over the last 12 months and by 11.4% since their low in the middle of 2009.
But the recent strong surge in London house prices has still not rippled out to the prime country house market. The volume of available stock in the prime country house market has risen by 24% over the past 12 months
While the volume of new applicants has dropped by 4% over the past year, the number of properties going under offer has risen sharply, up by 32%, suggesting that stock volumes should begin to decline slowly over the next few months.
‘In normal times the prime country house market would follow the growth cycle set by the central London market, with a lag of around 18 months. London booms, the luxury country house sector follows,’ said Bailey.
‘These are not normal times. Prime London property has risen in value by 36% since March 2009, but prime country houses are only marginally above their post Lehman nadir reached in 2009. And, while London prices have kept rising through 2011, the country house market has stuttered to a halt, in terms of price growth at least,’ he explained.
However, he pointed out that the old picture of market ripples flowing out from London is still partially correct as prime property prices in the south east of England rose by 0.4% over the past year, managing to climb 11.4% from the mid-2009 trough. Despite this relatively robust picture in the South East, there is a significant difference between London and country and this comes down to international buyers.
‘Outside of the main Surrey estates, such as Wentworth and St George’s Hill, international buyers are a comparative rarity. Where the £1 million plus market in London comprises almost 50% international buyers, for rural properties the figure is closer to 12%,’ said Bailey.
‘In the prime country market, despite the fact that buyers and sellers tend to be wealthier and far more equity rich than the average UK buyer, domestic concerns are the key influences. With the UK economy struggling and wealth creation under pressure, vendors are having to compete keenly on price. Anything other than an absolutely perfect property can not be priced ambitiously at the outset,’ he explained.
‘The flow of buyers coming out of London is helping liquidity in the country house market and this flow is helping to create competitive bidding on some properties, especially in the south east of England. With the volume of prime country property going under offer rising by 32% over the past year (three months to September compared to the same period in 2010), there is just the glimmer of hope that London’s surge might push out a little further than the M25 in time,’ he added.
According to Rupert Sweeting, head of Knight Frank’s Country Department, buyers are not only price sensitive, they are being fussy and are wary of buying houses with perceived problems. ‘Whilst the market can appear a little lacking in confidence, having to bid against another interested party is giving buyers a confidence boost and there have been some surprising prices paid in such circumstances. Traditionally the country house market is 18 months behind the London market, so let's hope this is the case,’ he added.
