Prime country house prices rose by 0.7% between July and September, continuing the modest upward trend of growth that started in early 2013. Prices have shifted upwards now for eleven consecutive quarters.
Annual growth also rose slightly to 2.7% on average, up from 2.3% in Q2 but down from a recent high of 5.2% in 2014. The market continues to feel the impact of the increased cost of stamp duty, following the Autumn Statement in December 2014.
This continues to weigh on both price growth and activity at the top end of the market. In fact, the latest figures from the Land Registry show that between January and July there have been 35% fewer sales with a value above £1.5m outside of London compared to the same period last year.
The prime market below £1.5m has been less affected by these tax changes. Illustrating this fact, prices for homes in the prime market valued under £1.5m have risen by nearly 4% annually over the year to September. In comparison, over the same time properties priced above £1.5m, the point at which the 12% rate of SDLT kicks in, have risen by 2%.
Under £1.5m, price growth has generally been underpinned by demand for homes in urban centres. Price growth in town and city markets including Bristol, Bath and Oxford for example, where buyers continue to be attracted by good schooling, amenities and transport links, has outperformed the wider prime market.
There remains a significant price differential between property prices in the prime country market and in London, while anecdotal evidence from agents suggests that there is pent up demand from buyers in the Home Counties and the South West.
This could help underpin prices and an increase in activity levels across the market as the year progresses. The average prime country house price is still 14% below its 2007 peak. In contrast, prime prices in London are, on average, 34% higher than their previous peak values. The rise in London prices in the last few years means that buyers looking to swap the city for the country are able to get a lot more property for their money, with such buyers able to take advantage of the relative “discount” which currently exists.
Rupert Sweeting, Head of Knight Frank Country, comments: “With such an imbalance in market values between London and country prices together with the surprise Conservative victory in the general election, we all expected much more activity. The two stumbling blocks have been the introduction of higher rates of stamp duty which means that at £10m, a buyer may be paying a further £1.2m on top. This combined with the new tax regime being introduced through the Finance Act has caused many to put on hold their buying plans until they have digested the minutiae of that Act.
However, activity is picking up this autumn in the realisation that country property is looking good value and we have seen bidding wars for houses if and when the guide price is at the right level. Looking ahead, with another four and a half years of Conservative rule and the economy looking stronger, we expect activity levels to rise.”
