While average house prices across the UK rose 9.5% in the year to the end of March, values in the prime markets of Shropshire and Staffordshire remained more subdued, with small falls of -1.8% over the same period.

However, the market reached a turning point six months ago as price growth turned positive for the first time since 2009, recording an average increase of 1.6%. Over the longer term, average values still remain -19.1% behind their 2007 peak, in line with the average seen for prime property in the Midlands.

Town vs country

Across the Midlands, properties in prime towns have seen the strongest house price growth, increasing by 2.9% over the past year leaving values just -12.9% below their 2007 peak. On the other hand, properties in rural locations have seen greater falls and are still -20.3% below their peak but values do now appear to have bottomed out, increasing by 0.9% in the past six months.

Within prime Shropshire and Staffordshire, towns such as Shrewsbury, Ludlow, Much Wenlock and Eccleshall are leading the recovery as demand returns to the urban locations first before filtering out to the neighbouring villages and rural locations. This reflects the wider trend seen across the country as buyers favour flourishing cities such as Cambridge, Bath and York.

Links to London

While the area is within a commutable distance to London, the prime housing market is still driven by local wealth. Across Shropshire and Staffordshire, 71% of buyers are moving from within the wider West Midlands.

Traditionally buyers moving from London to the regions have preferred neighbouring locations in the Home Counties. However, the more adventurous seekers of value are beginning to look at locations further afield, including the West Midlands, especially when they have family or employment connections there.

The prime markets of the West Midlands continue to offer good value for money. The average asking price for a four bedroom house in Much Wenlock (TF13) is £427,650 according to Rightmove. In comparison, a four bedroom property in Clapham (SW4) is £1,051,470.

Stafford, in particular, is well connected with a commute of an hour and 15 minutes to London, attracting buyers who work in the Capital for a couple of days a week to the region. This also benefits neighbouring towns such as Eccleshall, Stone and Brewood and the surrounding villages. Across the region as a whole, 9% of prime buyers work in London.

Good schools also play a key part in drawing buyers to the region. There is a selection of high profile grammar and private schools to choose from, the latter of which are particularly popular with expats returning to the UK.

Signs of life

In the West Midlands, the beginning of an economic recovery is evident. The commercial market is presently at a turning point and renewed demand outside of London has returned growth to the labour market. In Birmingham, office based employment has risen by 3% in 2013 and is predicted to increase 2% per annum over the next five years. This has led to an increase in investment, particularly international, into office space in the city.

Additionally, companies who already have a presence are reinvesting. A good example of this is the expansion by Jaguar Land Rover last year, when they invested £500 million into a manufacturing facility near Wolverhampton, employing nearly 1,400 people.

The presence of such companies in the West Midlands reflects the main employment of buyers in the prime housing markets of Shropshire and Staffordshire. Manufacturing and related industries account for 37% of buyers, with only 7% working in the finance and insurance service sector, and this has underpinned the recovery of the prime domestic markets of London and the South East.

Outlook

The prime housing markets of Shropshire and Staffordshire are largely dependent on demand from wealth generated in the local economy. With the economic recovery that was initiated in London and the South East gaining a foothold in the region, we believe that the prime housing market of Shropshire and Staffordshire should begin to benefit from an improvement in buyer sentiment over the next 12 to 24 months.

While the ripple effect from London has been slow to arrive thus far, we expect the number of buyers moving from London to increase as they take advantage of the comparatively affordable prices. Since the downturn, the value gap between London and the rest of the country has widened to an all time high. However, by 2017 we expect the house price growth in the West Midlands to outperform London as the market moves in to the next stage of the cycle.

There is a slight threat to the top end of the market around the election, given that taxation of high value properties is high on the political agenda. Stamp duty has already increased for properties over £2 million and if there are further changes to this there risks a period of sobriety. However, our outlook for the whole of the prime Midlands and North remains positive, with a forecast of 18.1% five-year growth.

Taken from
Market in Minutes: Prime Shropshire and Staffordshire - June 2014