"The main drag on the market is the time it is taking for transactions to go through – currently around 12 weeks on average"
Whilst London has historically been the primary driver of national house price growth, in 2016 the region was outperformed by the Outer South East, East Anglia and the South West regions.
Vanessa Hale, Partner in Research at Strutt & Parker, said: “UK house prices grew 4.1% year on year to Q1 2017 but in PCL it was a very different story and prices fell by approximately 7.0% in 2016, leaving values around 13.0% down from the 2014 peak. The first quarter of 2017 has however seen a slight upturn in purchaser activity and realistically priced, good quality stock is selling reasonably well.”
The past few years of tax changes and higher property purchase costs have impacted the country house market for properties priced above £2m. However, the market continues to attract buyers employed in finance (30.0%), property (13.0%) or agriculture (12.0%) and who seek their primary home (76.0%).
Guy Robinson, Head of Regional Residential Agency at Strutt & Parker comments: “In the regions we are seeing higher transaction levels than this time last year and prices are holding up. The main drag on the market is the time it is taking for transactions to go through – currently around 12 weeks on average. More legislation and an increased number of hoops to jump through is elongating the process.”
In PCL, transactions in the sub £2m market in PCL saw a decline of 32.0% when comparing Q1 2017 to Q1 2016, however the entire PCL market at all price levels is down 27.0% for the same time period and follows three consecutive quarters of increased transactions. It is believed that the market may have already experienced the bulk of price falls. In addition, the recent weakness in sterling has played a part in attracting overseas purchasers and given a spur to higher value market sector activity. However, we continue to see the dominance of UK domestic buyers in PCL, with UK expat money seeking homes in the country over £2m, likely taking advantage of the US dollar strength against the UK pound.
Charlie Willis, Head of London Residential Agency, said: “We have seen a positive change in buyer sentiment and an uplift in transaction levels in the first quarter of 2017 compared to the end of last year. Values have now softened by up to 10% and buyers realised there are good opportunities out there. Meanwhile sellers are beginning to understand the importance of realistic pricing. Stamp Duty which was a concern for many buyers last year, is no longer causing such an issue and the market has absorbed this extra taxation.”
In the PCL lettings market, the take-up of new rental tenancies increased by 22.0% in Q1 2017 compared to the same time last year. Rental prices also seem to be holding up. HomeLet is also reporting that the combined boroughs of Kensington & Chelsea and Hammersmith & Fulham delivered an average rent of £1,823 pcm (1.2% annual increase).
Strutt & Parker and its economic forecasters Volterra are forecasting house price rises of 3% across the UK in 2017, with flat growth of 0% in PCL as a best case scenario.
Vanessa Hale concludes: “It is likely that much of the downward pressure on PCL house prices because of Brexit and Stamp Duty changes has already been experienced. Although transaction volumes seem to be picking up across the PCL market, we continue to be mindful of the political uncertainty in the UK and across the globe when forecasting.”
