Market in Minutes: Prime Country Residential Markets

Subdued house price growth outpacing the prime London markets.

The prime country markets saw marginal growth of 0.5% over the third quarter of 2015, leaving average values 1.6% higher than a year ago. This reflects a general lack of urgency among buyers who remain cautious in light of the pre election stamp duty changes. Although annual growth has been subdued it outpaced the capital where prime property prices have been flat year-on-year.

House price growth continues to vary by type of property and location across the prime regional markets. The south of England has seen the largest annual increase, up by 2.6 %, followed by the outer commute and inner commute. Scotland has been the only area to experience price falls with values down -0.5% as the Scottish parliament's reform of stamp duty and introduction of LBTT has dampened demand.

Stamp duty changes have underpinned continued price growth for properties under £1m, with reduced tax rates making smaller properties the most desirable. By contrast at the top end of the market increased transactional costs have had an adverse effect. Homes under £500k have experienced the strongest growth with values up by 4.3% annually, while those over £2m saw values fall by -1.6% during the same period.

Consequently cottages saw a rise in values of 3.3% over the year, compared to a -1.1% fall in value of manor houses as prices adjust to the new stamp duty regime.

Since the credit crunch we have seen the continued rise of the prime urban markets. ‘Little Londons’ such as Cambridge, Bath, York and Edinburgh have seen price growth race ahead of their neighbouring villages and rural areas. We expect the trend for urban living to continue as this is where London buyers are likely to relocate to.

TABLE 1Price movements in the prime markets to Q3 2015

^{Source: Savills Research}

Outlook

Although there are early indicators that sentiment is beginning to pick up, there remains a lack of hurry among buyers, in part stemming from a relatively sluggish market in the capital. This has combined with relatively high levels of stock available on the market, which built up pre-election that constrains prospects for prime growth in the short term.

In the medium term the relative value offered in most prime regional markets compared to London is likely to underpin price growth however sellers need to remain realistic in terms of pricing in the interim.