Pricing flat but rural markets outperform
Price growth in prime regional markets remains modest as both stamp duty and Brexit uncertainty continue to weigh on markets, but there are positive signs.
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Prices in the prime regional and country house markets rose 0.4% on average between January and March 2018, and were virtually unchanged on an annual basis at 0.2%. A lack of new stock remains the main factor underpinning prices in a number of markets across the country, with Rightmove data showing a 21% drop in £1m+ properties listed for sale outside of London during the first three months of 2018 compared with 2017.
Stamp duty is still affecting supply issues, compounded by uncertainty over Brexit. Perhaps counterintuitively, however, this recent tightening of new supply follows a period during which activity in prime markets has been fairly robust.
Data from the Land Registry, which covers transactions which took place in the 12 months to November 2017, showed the number of £1m-plus sales completed outside of London was 10% higher year-on-year, indicating that the underlying demand for homes remains fairly strong. Yorkshire and the Humber, the North West, Wales and the West Midlands all saw £1m-plus sales volumes increase by more than 20% as buyers cast the net wider.
Back to pricing, there remain regional variations between prime markets, as the table below shows. Growth ranges from 3.1% in the North to -3.8% in North Surrey. Weaker performance in traditionally higher value markets in London’s commuter zone mirrors the performance of prime markets in the capital, where prices are, on average, 8% lower than the peak of the market in August 2015.
Early signs of a rural revival?
Over the past 10 years urban areas have outperformed their rural counterparts in terms of price growth as people are drawn to town and city amenities, transport links and good schools. On average, prime urban values stand about 5% above their pre-crash peak, while rural values remain around 10% below.
However, our index points to a softening in prices in town and city markets over the last 12 months. The opposite has been true for more rural markets which look relatively good value for buyers in comparison.
Our view continues to be that we’ll see a slight rise in values in 2018 across prime markets on average, though there is little to suggest that the price-sensitive nature of the market will change. Ongoing Brexit negotiations and high purchase costs at the top end will likely keep a lid on growth. A further interest rate rise also looks likely later this year.
