But there are differences on a regional basis, according to real estate firm Savills whose latest analysis report points out that it has become pretty much impossible to talk about the UK’s prime housing markets beyond London as a single entity.
It explains that since the economic downturn of 2008, the markets have become increasingly stratified, reflecting not only their distance from the capital, but also the tier of the prime market in which they sit and whether they are in an urban, rural or coastal location.
Wide price differentials now exist between London and its commuter zone, the remainder of England and Wales and, indeed Scotland. A property worth £1 million in 2007 would now be worth £1.34 million in London, £1.05 million in the commuter zone and £780,000 in Scotland.
‘Within each of these areas, the prime urban markets have generally been on the rise, while their rural counterparts have lagged behind to date. Although the medium term prospects remain positive, all of these submarkets face challenges in 2015,’ explained Lucian Cook, head of residential research at Savills.
‘Although the economic recovery has held firm and the outlook for interest rates remains relatively benign, political uncertainty in the run up to the general election has, for the moment at least, resulted in an air of caution among buyers,’ he said.
‘The mainstream markets, which impact on sentiment higher up the value chain, seem to have been similarly affected despite the best efforts of the Chancellor to stimulate a feel good factor with the recent long overdue reform of stamp duty. The reality is that the increased regulation of the mortgage market will have played a significant part in bringing a period of sobriety to the wider housing market following strong growth in the first half of 2014,’ he pointed out.
‘Despite lower levels of mortgage debt dependency, regulatory limits on the amount of borrowing a buyer can take on board will also have had an impact on those looking to work their way up the prime housing market. Meanwhile, a significant chunk of the prime market now finds itself with a larger stamp duty liability,’ he added.
Cook also explained that taxation has been an even greater concern in the upper echelons of the prime market and the debate around a mansion tax has done nothing to engender a sense of urgency among buyers.
‘However unwelcome and unwarranted the proposal, owners of prime regional housing may take some solace from the fact that the main burden of the tax would be felt by owners of higher value properties in London,’ said Cook.
‘If a mansion tax is introduced it has the potential to make properties outside of the capital, that already look comparatively good value, appear even more attractive. Over time it could drive demand to properties worth under £2 million and to the £2 million to £3 million bracket where we are told a mansion tax would be limited to £3,000 a year,’ he added.
The report says that the medium term outlook for the prime housing markets beyond London looks much brighter. ‘Even in the event a mansion tax is introduced in the form currently proposed, we are forecasting five year price growth of 19.6%. If the current uncertainty around further taxation is removed we would expect a much quicker bounce back and a more orderly reinstatement of the ripple effect that appeared to have gained some traction in the first half of 2014,’ Cook explained.
But he added that the force of that ripple effect will continue to vary between different submarkets, with those receiving the strongest initial boost being the most popular commuter markets where London based buyers are most active.
‘We expect locations offering the best family living environment to benefit most, putting great emphasis on the quality of schools. The elastic between the markets of these uber towns and their rural counterparts, and the commuter zone and beyond, can only be stretched so far,’ Cook pointed out.
‘As in previous housing market cycles, there will be a point where the value gap between them creates a compelling reason to buy. This means whatever the hiatus caused by a general election, there will be buying opportunities across all of the different submarkets, stimulating a more widespread recovery over the medium term,’ he concluded.
