Prime properties in regional cities saw growth of 1.7% in the three months to the end of June, with annual growth totalling 8.1%, driven by demand from those relocating from London and downsizers.
This compares to quarterly growth of 0.9% for village properties and 0.5% for prime properties in rural locations, and annual growth of 5.3% and 3.3% respectively, according to the analysis from real estate firm Savills.
However, the report points out that the market above £2 million remains more fragile, with the price threshold that resulted from stamp duty increases remaining entrenched. This is evidenced in the prime country house market which recorded quarterly growth of just 0.1%.
‘The recovery in this high value marketplace is hard to generalise, since every property and location is unique. Some properties are selling rapidly, with competition, while others require price adjustments to sell as fragile buyer sentiment remains susceptible to the changing news agenda, in particular the renewed spectre of a mansion tax,’ the report says.
It also explains that the prime market is responding to the positive sentiment in the mainstream market, with stock levels increasing as downsizers in particular sense an opportunity to sell into a more buoyant market.
‘However, in some cases, headlines of house price growth are giving sellers a false impression of the value of their property, creating a gap between their expectations and those of the buyers who are sensitive to headlines of interest rate rises and the like,’ it adds.
‘At the top end of the market, there is a threat around the 2015 election, given that taxation of high value properties is high on the political agenda. We expect values to plateau in locations with a high concentration of properties over £2 million as buyers remain cautious. New sellers entering the market should price for these market conditions,’ the report points out.
‘However, assuming there are no further changes to the taxation of high value property, our outlook for the prime regional markets remains positive, with a forecast of 22.7% over the five years to 2018,’ it says.
It also shows that the strongest growth continues to be seen closer to the capital reflecting a displacement of London housing wealth into commuter markets. The prime suburbs have outperformed the capital for the first time since the credit crunch, recording growth of 5.7% in the first six months of 2014, compared to the prime London average of 4.9%.
Values throughout the commuter zone are now back to, or above, their 2007 peak levels. This quarter saw house prices in the outer commuter zone, a ring of up to one hour’s travel distance from the capital, return to peak for the first time.
However, beyond the commuter zone, prices remain some way below their 2007 peak, despite annual price growth. At the extreme, in Scotland, where the forthcoming independence referendum is causing some uncertainty, particularly amongst buyers from outside Scotland who are key to a full recovery in the high value markets, prices are 21.9% below peak.
