The UK prime market average rose by 5.7% in the year to the end of June and 3.1% in the first six months of 2014, the Savills prime regional index shows.
Though less than the growth seen in the first quarter, second quarter growth averaged 1.1%, in line with prime London where the rate of price rises has slowed and suggesting that the gap between the two markets may have peaked.
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%.
‘There is now clear evidence that the recovery is taking hold across the UK more widely, with a return to former 2007 peak values still a useful benchmark of that recovery,’ said Lucian Cook, Savills UK head of residential research.
Across the Savills prime regional index values remain on average 5.6% below their former peak, while the outer commuter zone, a ring of up to one hour’s travel distance from the capital, saw a return to peak in the second quarter. 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.
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,’ explained Cook.
The analysis also reflects the fact that buyers continue to favour urban locations. 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%.
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. Prime cities are now on average just 1.7% below peak, compared to prime rural properties which are 13.5% below.
‘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,’ Cook said.
‘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,’ he added.
