Prime country house values stagnated over the summer, tickling up by just 0.1% during Q3.
Buyers continue to be rather price-sensitive, with higher stamp duty rates still weighing the top-end down – despite having been introduced almost three years ago. The effects of general economic and political tumult, meanwhile, is being felt most around the capital, where price drops have rippled out from London into the ‘burbs and commuter zones.
Here’s Savills’ snapshot of the prime country market over the Summer months:
Despite some caution, transactions at the top end of the market have held up well. There have been 17,700 £1m+ sales across the UK in the year to the end of June, according to official figures from HMRC. Although this is lower than the 19,500 seen over the same period in 2016, it represents a 6.6% increase on the 16,600 seen in the 12 months to June 2014.
Sensitive market remains active
Prime markets across the UK have become noticeably more needs-based, reflected by lower levels of new stock. During the first six months of 2017, 8% fewer £1m+ properties outside of London were brought to the market than the same period in 2016.
Another feature of the prime markets at the moment is the level of price cutting, which has become increasingly common. In the first six months of 2017, the asking price of 10,604 £1m+ properties across the UK was reduced, a 90% increase on the 5,585 seen over the same period last year.
These cuts have been less apparent beyond London. Over the 12 months to June 2017, there were 76 price reductions for every 100 £1m+ properties sold outside the capital. But where these price cuts have been happening, deals continue to take place, suggesting that while prime markets may be price sensitive, they remain reasonably active.
Size impacts growth
Since the stamp duty reform of 2014, larger and grander properties like country houses and manor houses, as well as those on the private estates of St George’s Hill and Wentworth, have suffered as the extra tax burden means buyers are far more cautious.
Over the past 10 years, towns and cities have been more popular than rural locations, leading to stronger levels of house price growth.
However, house price growth of village and rural locations now appears to be converging with the urban markets.
Of those urban locations, Edinburgh and Glasgow have been the strongest performing more recently, with house price growth of 2.2% and 0.9% respectively over the three months to September.
The prime country markets are expected to continue to follow the pattern of the past three years by showing little growth. However, while London’s suburbs and commuter zone will wait until 2019 or beyond to see a return to price growth, other regional markets are expected to see marginal price rises next year.
While factors such as the availability and cost of mortgage finance are relevant to all of the prime country markets, the flow of equity out of London plays a significant part in the future of the prime housing markets of the commuter zone.
Another year of negotiations followed by post-Brexit uncertainty throughout 2019 means these markets will be slow to see a return to price growth. But, over the next five years, as the capital’s prime housing market ticks up, they are likely to be the strongest regional performers, with growth peaking at 15.3% in the outer commuter zone.
Here, the price gap is key, particularly for Londoners looking for more space, and should help reduce price sensitivity in these markets.
Further from the UK capital, the prime country markets are more dependent on general economic drivers and the extent to which they support a wider ripple effect. The wider South of England, Midlands, North of England and Scotland have all seen small average price increases so far this year and that will continue into 2018.
All of these regions will underperform London’s commuter belt over the five-year period, but see marginally stronger growth than outer prime London, suggesting that the value gap is stretched to its maximum.