UK Residential Market Outlook: Week Beginning 6 July
Not all areas of the property market have responded in the same way to the pandemic and the early signs suggest that prime markets may recover more quickly, says Tom Bill
2 minutes to read
The pandemic is affecting different sectors of the economy unevenly and the same is true for UK property markets.
For the second quarter of the year, the overall trend for prices and transactions was down, which is unsurprising given the eight-week shutdown of the property market and the shadow being cast over the economy by the prospect of higher unemployment.
However, in the same way that certain parts of the economy have thrived, demand in the higher-value Country House market has flourished, as we explore in more detail here.
Prices have edged higher in recent months due to the scarcity of supply, higher demand for country living and a group of buyers whose financial position means they can transact more quickly.
The same trend hasn’t been seen in London, where the picture is more nuanced, but it is perhaps only a matter of time.
Since the end of lockdown, the number of new prospective buyers in the capital has risen 68% for £5 million-plus properties compared to the five-year average, which was the biggest jump of any price bracket.
While that is a sign of what may come, the biggest increase in deals agreed since the end of lockdown in the capital has been for sub-£1 million properties. A rise of 20% against the five-year average perhaps reflects the desire for more space among people living in relatively smaller properties, while remaining in the sub-£1 million price bracket.
Despite these idiosyncrasies, a quicker recovery in prime markets would tally with the period that followed the global financial crisis.
An analysis of total spend found that that higher-value property markets came back from that crisis more strongly.
Taking a low-point of May 2009, total spend on UK property had grown by 108% 12 months later. The equivalent rise was 132% for UK properties valued at more than £2 million. For the same price bracket in London, the increase was 140%.
There are various ways the pandemic is different from the global financial crisis, but the fact house price growth for high-value properties has been so weak over the last five years will also play its part.
While prices in England and Wales grew by 22% in the five years to March 2020, there was an 8% fall in the £5 million-plus country house market. Average prices in prime central London fell by 13% over the same period.
These are some of the subtleties that will shape the UK property market as it moves into recovery mode, however erratic it proves to be.