Prime regional values fall 0.6% in 2018

The annual change in prices in prime regional housing markets in England and Wales fell for the first time in 18 months in 2018, according to Knight Frank figures. Values dipped by 0.9% in the fourth quarter of the year taking the annual change to -0.6%.

Recent performance reflects a general lack of urgency among both discretionary buyers and new vendors, with uncertainty over Brexit and the political future of the UK now at the forefront of their minds. Many, according to our sales negotiators, are choosing to sit tight and wait for clarity as the March 2019 deadline for leaving the EU nears.

Despite hesitancy, it is worth noting that demand, as measured by prospective buyer registrations and viewings, is on a par with levels seen a year ago and above the level seen in 2015, irrespective of the current uncertainty. This may suggest that pent-up demand is forming and could be released once the political uncertainty recedes.

Where sales are being achieved they are generally taking longer to complete, particularly in the south of England. Knight Frank analysis measuring the time taken between when a property is listed for sale and a sale is agreed shows that, so far in 2018, the time taken to sell a house valued above £500,000 in the South East has increased by 23% compared with 2016. In the East of England the increase is 28% (figure 1).

REGIONAL VARIATIONS

It remains the case that there are variations in price performance depending on property type and location. At a regional level, for example, prices dipped by 3.1% annually in prime markets across the North Thames and Chilterns. In the North, annual price growth was positive, albeit only at 1.3%.

Price movements also varied by property type, with longer-term performance highlighting some stark differences. Manor houses, for example, have reported 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.

OUTLOOK

The rate of annual growth in the prime country market has averaged less than 1% since mid-2016. Against the backdrop of Brexit negotiations, it’s likely that these current market conditions will continue in the short-term.

While pricing is expected to remain subdued, the relative value on offer in most prime regional housing markets, especially when compared with London, should help underpin demand in the coming years. We are forecasting cumulative price growth of 0.5% across prime regional markets in 2019 and cumulative growth of 8.2% between 2019 and 2023. The ongoing pressure on property prices in the capital is likely to be reflected in nearby commuter locations, with stronger growth reserved for markets further afield.