Prime housing markets outside London have experienced modest growth since the middle of 2014, but the overall rise of 3.4% over the last three years hides stronger performance pockets, a new analysis shows.
In the year to September 2017 the price of prime country properties worth between £4 million and £5 million fell by 5.3%, and those worth £2 million to £3 million by 1%. Properties worth between £1 million and £2 million rose by 0.2%.
Prime prices in the country remain around 13.6% below the previous market peak back in 2007. Overall, according to the analysis from Knight Frank which is forecasting average growth of 1.5% across prime country markets in 2017 and of 2% in 2018.
Overall price growth in the prime country market has been steady, and has outperformed the market in prime central London over the same time frame and properties closer to urban locations have performed better than those in more rural areas, according to the report.
Prices in Bristol, for example, have risen by 7.4% annually while prices in Cheltenham are up by 6.4% over the same period. Price growth in Edinburgh is also outstripping that in the wider prime Scottish market.
The report explains that access to schools and transport hubs are among the attractions of more urban markets, especially those within commuting distance of London, although the increasing opportunities for remote working over the last decade has extended the traditional commuter zone for those who can be flexible in the way they work.
The price differential between London and country homes has also encouraged people to make a move from the capital. Nearly a quarter of Knight Frank country home buyers in 2017 who purchased a property valued above £1 million made the move from the capital. This trend is expected to continue, especially in light of the more moderate price performance in London.
The report points out that there are pockets of strong activity in the country market, but a combination of macro-economic and political factors mean the underlying environment is more uncertain and prime residential markets in the UK, especially for homes valued at more than £1 million, have had to cope with considerable regulatory change over the last five years.
‘The tally of property tax reforms totals just under 30, covering most noticeably stamp duty, but also inheritance, capital gains and non-dom taxes. Added to that, a lack of clarity surrounding Brexit and the snap general election earlier this year has led to hesitancy among some buyers and sellers, according to our agents,’ the report says.
‘Having said that, the prime country market seems to be gaining momentum with a higher number of prime transactions in the first seven months of 2017 compared to the same period in 2016. However, the length of the sales process has started to increase, with evidence of price renegotiations in some instances,’ it explains.
‘An added factor at play in the market is the relative value of sterling for buyers using dollars or other overseas currencies to purchase a home, providing an effective discount on the price of bricks and mortar across the UK,’ it adds.
There are some trends that also unite many local markets and one of these is a continued lack of stock, which is underpinning pricing in some respects, according to the analysis and there is also a notable difference in performance across price brackets. Some of this can be attributed to the market having adjusted to higher stamp-duty charges.
Looking ahead Knight Frank predicts that the prime market will remain price sensitive in the short to medium term, as it continues to adjust to higher rates of taxation and political uncertainty. The strongest markets will continue to be well connected towns and cities, although this differential is expected to narrow as buyers take advantage of the relative value now offered by more rural markets.
