Savills : Prime UK housing markets begin to stabilise
The rate of price falls across London’s prime housing markets has slowed significantly since the beginning of the year and there are early signs that values are bottoming out, says international real estate adviser Savills. At the same time, the prime regional markets continue to see modest price growth, according to the firm’s quarterly prime market indices.
First quarter falls averaged just -0.3 per cent across the prime London housing market as a whole, where values average around £2million, compared to falls of -2.2 per cent in the final quarter of 2016. This leaves values -6.1 per cent down from their 2014 peak, given the dual effects of stamp duty reforms and the vote to leave the EU.
The prime regional markets – the top 5 to 10 per cent of the market by value and location – continue to show modest growth, up 0.8 per cent on average in the quarter, and a total 4.4 per cent since the end of 2014. These generally lower value markets, have been less exposed to factors causing London to falter, not least because they did not rise to anything like the same extent post credit crunch. As such, they also still represent relative value compared to the UK capital.
In prime central London, where prices average around £4 million, values slipped just -0.8 per cent, compared to -2.1% in the preceding quarter. This leaves them -13.2 per cent off their mid 2014 peak. Even at the very top end of the market, in the £10million+ range, values appear to be stabilising, thanks in some part to the currency advantage attracting non sterling denominated buyers into play.
In other parts of London, which tend to have a more domestic buyer profile, and are therefore more affected by the lending environment, prime values flatlined in the quarter.
“Brexit uncertainty has compounded the cooling effect of stamp duty, but it now looks as though values are finding their level and where asking prices reflect this, buyers are coming back into the market,” says Lucian Cook, head of UK residential research at Savills. “However high levels of over-priced stock remain in the market, some still pegged to peak values, suggesting we have probably not yet seen the end of asking price cuts”
“And though it looks as though the bulk of value falls are behind us, with article 50 to be triggered this week, we expect the market to ebb and flow for the next two years, in step with the news agenda.”
Regions show growth:
Prime property prices in the other UK regions recorded marginal price growth in the first quarter. That means all regions are showing modest annual price growth, with the exception of stock located in the suburbs on London’s fringes.
At a regional level, the strongest year on year growth has been seen in and beyond the outer ring of the commuter zone between 30 to 60 minutes by train from London, albeit confined to 2.4 and 2.6 per cent respectively.
But these averages conceal real variation at a more local level. Buyers continue to favour urban and village locations over rural, and the market for the best housing in the likes of York, Chester, Bristol and Edinburgh, have been markedly more robust than for neighbouring rural property.
The country house market, which has struggled to gain momentum over recent years, saw values rise by a marginal 0.8 per cent in the first quarter of 2017. A shortage of open market stock and buyers who remain slow to commit, continue to suppress transaction volumes, but like London, the country house market appears to be seeing the end of price falls.