Prime time for premium property

The underlying demand for prime property across England and Wales remains strong with the latest figures showing an increase in offers made and properties sold subject to contract.

Prime property prices in regional markets in England and Wales fell by 0.8% over the first three months of 2019, the third consecutive quarter that average prices have fallen, the data from Knight Frank shows.

The figures also shows that in the 12 months to March 2019 prices in the prime markets have fallen by 1.8%, the biggest fall on five years. But Oliver Knight, residential research associate at Knight Frank Residential Research, said that the underlying demand for prime property across England and Wales remains strong with Knight Frank figures showing a 5% increase in offers made and a 22% rise in properties sold subject to contract.

He pointed out that recent performance in regional markets reflects heightened political uncertainty surrounding the UK’s planned exit from the European Union. ‘A lack of clarity about the outcomes and timings has resulted in caution among some buyers and sellers in prime residential markets,’ he explained.

Knight also pointed out that there are variations in price performance depending on location with prime markets closest to the capital feeling the effects of a weaker London market. Values in North Surrey, for example, fell by nearly 3% annually.

Elsewhere, average prices in markets across the North Thames and Chilterns fell by 5.4% over the 12 months to March. Generally, more moderately priced properties have been resilient. Property worth up to £1 million fell by a relatively modest 0.7% annually, while £2 million plus properties have fallen by an average of 2.5%.

‘The prime market is expected to remain subdued in the short term, with Brexit leading the headlines and impacting on housing market sentiment. However, when the political uncertainty recedes we expect underlying demand to crystallise into more activity,’ said Knight.

‘This, along with the relative value on offer in most prime regional housing markets, especially when compared with London, should underpin a modest increase in values of 0.5% in 2019. On a longer term basis, we are forecasting cumulative growth of 8.2% between 2019 and 2023,’ he added.

The research also shows that price movements varied by property type, with longer term performance highlighting some stark differences. Manor houses, for example, have recorded modest growth of just 0.8% during the past five years, compared with growth of 19% and 24% respectively for cottages and townhouses over the same period.

This mirrors a wider trend of outperformance within the market for properties located in urban town and city settings, relative to more rural counterparts. Strong price growth in the years following the financial crisis in areas including Bath, Bristol, Cheltenham and Oxford means values for prime homes in urban locations have surpassed pre-financial crisis peaks.

Rural properties by comparison remain more than 10% below peak levels. But Knight believes that this relative value could help drive demand in more rural markets in 2019.