A growing trend of living in thriving town and cities other than London since the economic downturn of 2007 is behind the increase, says the new analysis from real estate firm Knight Frank.
Across all the prime regional markets, urban properties are now on average 4.1% above their 2007 peak. This has been particularly evident in prime towns and cities including Bath, Oxford, Winchester and Cheltenham.
The report also explains that demand is strong in these locations, in part due to the high concentration of prime housing stock and good schools which make them attractive to families looking to upsize, but also thanks to a growing number of equity rich downsizers looking to move to areas where they can have access to a range of good restaurants, shops and amenities.
‘An important consideration for such buyers, however, is just how much extra it costs to move to a property with more bedrooms, or how much equity can be released by downsizing, especially given the fact that in some regional cities the price per square foot can be similar to some London boroughs,’ said senior analysis Oliver Knight.
Looking at the latest average house price trends across the country, the firm’s research team has calculated that the cost of adding or removing a bedroom is around £52,000 on average across England and Wales. This figure does not take into account the added costs associated with buying a property, including stamp duty.
The regional nature of the market means that in terms of costs and savings there are large variations depending on where households are based and where they are moving to, as well as the type of properties involved.
‘We also acknowledge that the size and amenities of homes with more bedrooms will generally differ from those with fewer bedrooms, and this too will be reflected in the price.
For example, downsizing from a five bed detached house to a three bed terrace in the South East could release around £263,000 in equity, based on average property prices, while downsizing from a four bed to a three bed property in the West Midlands could release £45,000 in equity,’ Knight explained.
‘There are also notable differences in terms of property type. Moving from a three bed terraced house to a four bed terraced property in Yorkshire costs, on average, £38,000. Making that same move from a detached property to another detached property costs closer to £50,000,’ he added.
The research also found that costs are greatest in markets on the outskirts of London such as Elmbridge, St Albans and Guildford, perhaps unsurprisingly given average property prices tend to be higher in such locations.
‘These markets have also been among the first to reap the benefits of the ripple effect of demand coming out of London. As regional economies continue to recover, more London buyers are expected to make this move,’ added Knight.
Overall prime country house prices rose by 2.4% over the year to March 2016 but prices remain on average 13.6% below their 2007 levels but they have been rising in the prime country house market for 13 consecutive quarters, the longest period of sustained quarterly price growth since before 2007.
However, London values are some 33% above their pre-crisis peak. More recently, over the year to the end of March 2016 price growth in the prime markets outside of London has slowed to 2.4%, down from 5.2% in 2014.
‘The moderation in price growth reflects a greater sensitivity to pricing from buyers who are continuing to adjust to a different tax landscape. In some cases asking prices have had to be reduced to align with buyer expectations. However, these headline figures do mask significant variations across the market,’ Knight said.
Analysis of Knight Frank data shows this trend has already begun to gather pace. There was a 46% increase in sales to Londoners over the first quarter of 2016 compared to the previous year. Knight Frank forecasts prime price growth of 3% on average in 2016.
But following recent tax changes, demand has generally been concentrated on lower price brackets. Transaction volumes have slowed more markedly above £2 million across England and Wales since the change. However, there are initial indications that the stamp duty increase in December 2014 is slowly being absorbed, with the higher transactional costs being factored into pricing at the outset.
But Knight pointed out that taxation remains a live issue. ‘The 3% surcharge for additional homes which came into effect from April means that prime second home markets are likely to remain price sensitive. Agents note that there was a spike in second home sales ahead of the introduction of the additional levy,’ he explained.
‘In the short term, uncertainty surrounding the outcome of the European Union referendum could have an impact on the market, causing some buyers to adopt a wait and see approach until after the vote,’ he added.
