Country Market Steady as Tariff Turbulence Sends Borrowing Costs Lower
Prime Country House Price Index Q1 2025: 269.3
3 minutes to read
In their own different ways, the improving weather and Donald Trump may support demand in the Country market this spring after a subdued first quarter.
Following the stock market sell-off caused by the implementation of higher US trade tariffs, financial markets have responded to fears of a slowdown by betting on a lower UK bank rate.
Ten days after the White House announcement, the Bank of England was expected to cut three further times this year, which compared to two before the tariff volatility began.
Five-year interest rate swaps were trading just below 4% on Friday morning, which compared to over 4.2% last month, which is a positive signal for lower mortgage rates.
Global stock markets fell sharply before recovering on news that Donald Trump would pause most tariffs for 90 days. However, bond markets reacted in a more circumspect manner, and the next three months will undoubtedly see periods of further turbulence.
The reason the relief is not more widespread is that 10% tariffs remain in place for most countries, there are doubts about what happens after 90 days, and the US is in an escalating tariff war with one of its biggest trading partners – China. There is also a fear that tariffs will prove to be inflationary.
However events unfold, the current uncertainties show sellers need to set their asking prices realistically, said James Cleland, head of the Country business at Knight Frank.
“Under £3 million, the market has been behaving in a fairly normal way,” said James. “But this is not a market to be ambitious and buyers are only showing an interest in competitively-priced stock. You can sell but only if you are prepared to be pragmatic.”
Underlining the importance of realistic prices, supply in the Country was stronger than demand in Q1. While the number of properties coming to the market increased by 3% versus last year, the number of new prospective buyers fell by 7%.
Jitters ahead of Trump’s inauguration in January meant borrowing costs rose and demand was also kept in check by April’s stamp duty increase. Exchanges in Q1 were 12% higher than 2024 as buyers rushed to complete, but others were put off and will have waited for the playing field to re-level this month. Stamp duty increased by a maximum of £2,500, or £11,250 for first-time buyers.
As the chart shows, the imbalance between supply and demand kept downwards pressure on prices, which fell by 0.3% over the quarter. It took the annual price fall in the Country to -1.6%, which was the widest decline since Q2 2024.
Above £5 million, the annual decrease was -3%, underlining how higher-value markets are more susceptible to the global economic backdrop and, since Labour’s election victory last July, the government’s hardening attitude to wealthy foreign investors. The number of new applicants for properties valued above £5 million in Q1 was 15% lower than last year.
Despite the recent tariff volatility, the UK could eventually benefit by reinforcing its credentials as a neutral trade partner.
It makes the decision to replace the non dom regime this month with something less competitive feel like a case of bad timing. That said, more certainty among buyers and sellers in prime markets about where they stand from a tax perspective could trigger decision-making, as we explored here.
You may have more luck guessing next month’s weather than predicting what will come out of the White House next, but the spring-like conditions are also supporting activity, says James.
Seasonality plays a more important role in property markets outside of the capital and the number of hours of sunshine in the UK in March was 66% higher than the same month last year, Met Office data shows. “More stock is coming to the market, viewings are rising, and agents’ diaries are filling up,” said James.
A sense of calm on financial markets would certainly help sustain that momentum.
Note: The Country House Price Index tracks prices in a range of urban and rural property markets above £750,000 outside London.