^{Source: Savills Research}

Urban prime

In the 30-60 minute commuter band around London, prices of prime property in town and city locations have risen by 5.8% year on year. This is the highest of all of the sub-categories of property within our prime indices.

By contrast, prices in the prime London markets are showing annual price falls of -1.6% marking an anticipated turning point in the market, where the gap between the pricing of prime property in London and the regions begins to narrow.

Country houses

Generally the country markets have remained a little more subdued. In particular, the large houses have had to contend with the biggest increases in stamp duty and the threat of a mansion tax in the run up to a general election. So whereas prime country cottages have seen annual price growth of 4.4%, prices of manor houses have on average fallen by -0.8% over the course of the year.

Similar concerns have affected the markets on the high value private estates in the South East, such as St George's Hill and Wentworth.

However, across the London suburbs and the inner commuter zone, prices have risen by 2.2% in the past year on average, meaning that they are 6.8% above their pre-crunch levels.

Beyond commuter zone

In England quarterly price growth also returned to markets beyond the commuter zone with prices rising by just over 1.0% having softened marginally in the wake of the Autumn statement. In particular, markets such as Bath and Cheshire are continuing to benefit from demand from aspiring young families and downsizers.

Coastal markets that have generally been much slower to recover due to their dependency on discretionary buyers, also showed encouraging signs of increased activity as prices increased by an average of 4.1% over the past year.

The divide between prime housing in urban and rural prime locations is also evident in Scotland, where prices rose marginally in the quarter leaving them up by just 0.4% year on year,compared to the prime markets of Edinburgh which are showing 6.0% annual growth.

* Assuming no mansion tax but allowing for revision of the council tax system
** Assuming the mansion tax is introduced in 2015
NB: These forecasts apply to average prices in the second hand market. New build values may not move at the same rate

Source: Savills Research

Outlook

All of the regions, from the prime suburban towns in striking distance of London to the prime markets of the Midlands and the North, have seen annual price growth. However, there are significant differences in where prices sit relative to their peak in different sectors of the market. This is likely to shape the market over the medium term.

In the same way that the value gap between London and the commuter belt has led to a significant pick up in interest from prospective London buyers, so the value gap between the commuter zone and beyond should drive a ripple effect as certainty returns to the market.

The timing and strength of that ripple in the prime market is dependent upon the extent to which the election brings political certainty and the tax policy adopted by a future government, which is reflected in our forecasts as shown below.