London is well known for its established prime urban market. In fact, across the boroughs of Kensington & Chelsea and Westminster, 24 wards saw an average sale price of over £1 million last year accounting for 69% of the two boroughs. There are a further ten wards with an average sale price over £1 million along the wealth corridors that run north and south west from the centre.

Beyond London

However, the growing trend for living within a thriving city or town outside of London has led to an increasing number of high value urban markets evolving further afield.

While house price growth in the regions has not kept pace with London, in fact the gap between prices in the capital and the rest has never been bigger, there has been one submarket which has clearly outperformed since the credit crunch.

Across all the prime regional markets, prime urban properties are now on average just -3.1% below their 2007 peak compared to their neighbouring village and rural locations that are lagging behind at -12.5% below.

Over the past year the outperformance has continued. This has been particularly evident in the prime cities in the outer commuter zone, notably ‘little London’ locations such as Oxford, Cambridge and Winchester. These cities have a very high concentration of prime housing stock, and have seen a growth in house prices of 10.9% over the course of 2013. By contrast, rural property prices in this region have risen by just 2.8% in this period.

A key driver for these markets are the equity rich buyers from London. Regional urban locations have become the first step for buyers looking to make the move out of the capital. Attracted by the ease of still having local conveniences on their doorstep but also taking advantage of the price gap and affording more for their money. Good schools are another big driver of the prime markets and the current intense competition for schools in the domestic London markets means families are willing to look further afield.

Looking forward

We expect the trend for urban living to continue. In 2013, we saw the first signs of wealth beginning to flow out of the capital and as the economy continues to recover and house prices outside of London show growth, we predict more London buyers will make the move out to the regions. The prime suburbs and urban locations are best placed to take advantage of this as the balance shifts between urban and rural prime locations.

Taken from
Residential Property Focus Q1 2014