Prime Downfall

Prime property prices are falling across the UK, reports Savills, with more rural markets seeing the biggest declines.

Prime property markets across the UK are “softening” as interest rates climb, reports Savills. Average top-end values across UK markets outside of London (broadly the top 5% to 10% of the market by value) slipped by -1.5% in the second quarter, leaving them -3.5% down year on year, yet still 12.1% up since the first lockdown in March 2020.

In a turnaround of the big pandemic property trend, house prices in regional urban locations are proving more resilient than rural areas – although Savills is at pains to point out that while the “move to the country” trend “may have slowed, it has not stalled”.

Frances McDonald, director in the Savills residential research team: “With increasing pressure on buyers’ budgets, committed sellers need to price in a way that reflects the prevailing macroeconomic conditions to achieve a sale.

“But the work-life balance has had something of a reset over the past six months, which has helped underpin values in prime city locations across the country which are now marginally outperforming. Ease of access to transport, work and amenities are once again priorities that trump lifestyle considerations for some buyers.”

Over the past year, high-value housing markets in regional cities saw price falls averaging -1.4%, while village and rural house prices fell by much chunkier -3.7% and -3.9% respectively. That’s taken a slice off the significant gains seen through the pandemic years but is more of an erosion than a reset so far.

“The impact of the work-life balance reset has been most keenly felt in the suburban and commuter markets – typically home to families and highly leveraged upsizers – where buyers have increasingly prioritised proximity to stations with direct links into London,” explains the Savills team. Easily commutable areas within a 30 minute train journey of London, have experienced the most significant price falls over the past year, of -5.2% on average.

By contrast, prime markets furthest from London including the Midlands/North of England, Scotland and Wales – where mortgage affordability is least stretched – have outperformed with less downward pressure on prices.

New buyer registrations are down overall across the UK’s prime regional markets, reports Savills – but demand is “currently standing up well to pre-pandemic levels.” In June, the estate agency handled 17% more buyer registrations than in June 2019. The supply of home available to buy, meanwhile, has improved a bit, but remains 5% below the pre-pandemic level.

Country house market: “all about best in class”

Country house prices slipped by an average of -1.5% in the second quarter and by -4.4% year on year, but the averages conceal significant regional variation.

In Scotland, the country house market “represents great value relative to other locations and significant launches continue to attract strong buyer interest,” says Savills. As a result, the market recorded marginal 0.5% price growth in Q2, in stark contrast to the South East of England where values fell by -4.9%.

“In these discretionary markets, lifestyle considerations continue to trump more practical concerns,” notes Savills. For example, properties in coastal locations recorded the smallest falls, down just -1.0% in the quarter and by 3.8% year on year, meaning values remain up 20.2% since the first lockdown in March 2020.

McDonald: “The mortgage markets settled much quicker than expected at the start of the year, but with rates accelerating again, we are starting to see increased price sensitivity, particularly, though by no means exclusively, in markets closest to London which are more reliant on borrowing.

“It’s vital that buyers and sellers align on price. Sellers who are realistic on pricing are continuing to command the most interest and are ultimately achieving a higher price.”

Source: primeresi.com