Savills UK : Prime country buyers on the hunt for value
House price growth across all prime regional markets slowed during the final 3 months of 2016, bringing annual growth to 1.8 per cent as buyer caution continued to impact the market, according to international real estate advisor, Savills.
However market activity was supported by increasingly realistic seller expectations on price, whilst the effect of stamp duty on higher value homes saw those lower value locations further away from London perform strongest, indicating buyers are now more focused on finding value and willing to move further afield to find it.
Values across all regions grew just 0.1 per cent during the quarter, whilst prime London continued to remain in negative territory. As prices in London become more aligned with buyer expectation, the market has become more fluid, unlocking sales in the regions where willing buyers looking to move from the capital are now able to transact. Consequently, lower value markets further from London fared better than their closer counterparts, with the strongest annual growth seen in the outer commute (30 to 60 minutes travel from London), up 3.4 per cent.
Table of prime regional price movement
“Pre referendum uncertainty, coupled with the rise in stamp duty from April last year, has affected sentiment in the prime regional house market, and it’s clear now the ripple of house price growth previously seen has been tempered” says Lucian Cook, Savills UK head of residential research. “Buyers are still seeking value away from the capital, but the right price now often comes before the right location.”
Prime properties in regional cities have been some of the strongest performers in the market historically, with cities such as Bristol and Cambridge seeing annual growth of 3.8 per cent over 2016, compared to just 0.9 for rural locations. However, the rate of growth appears to be slowing as equity flowing from London has left them looking fully valued. Established hotspots Oxford and Cambridge saw values increase marginally, up 1.0 per cent and 0.4 per cent over the quarter.
Smaller, lower value homes continue to outperform the rest of the market, with those priced under £500,000 remaining the most robust and showing growth up 0.5 per cent since September. In contrast, homes priced over £2 million saw values slip by -0.6 per cent, reflecting the ongoing impact of stamp duty rises.
Table of growth by price band
“Buyer sentiment across the prime regional market is expected to remain sensitive over the coming year as the exit process to leaving the EU becomes clearer and more established,” says Cook. “As a result, we expect little or marginal growth. There is growing recognition that the value gap between London and the regions is as wide as it is going to be, which in turn is likely to boost buyer commitment and demand will remain strong for realistically priced homes particularly with access to good transport links and schools.”