Prime markets in the UK have enjoyed a busy start to 2016. One of the key questions for the market is whether this momentum will be maintained for the remainder of this year.
Prices have been rising in the prime country house market for 13 consecutive quarters, the longest period of sustained quarterly price growth since before 2007. But despite this relatively prolonged period of unbroken growth, prime property prices outside of the capital still remain 13.6% below their 2007 levels, with Lincolnshire specifically at closer to 16% lower. By way of comparison, London values are some 33% above their pre-crisis peak.
More recently, over the year to the end of March 2016 price growth in the prime markets outside of London has slowed to 2.4%, down from 5.2% in 2014.
The moderation in price growth reflects a greater sensitivity to pricing from buyers who are continuing to adjust to a different tax landscape. In some cases asking prices have had to be reduced to align with buyer expectations.
However, these headline figures do mask significant variations across the market. The most active markets continue to be prime town and city locations with excellent transport links back to the capital which have been among the first to benefit from the ripple effect of demand out of London.
As regional economies continue to recover and the London housing market remains subdued, more London buyers are likely to make the move out of the capital. This trend has already begun to gather pace. There was a 46% increase in sales to Londoners over the first quarter of 2016 compared to the previous year.
Following recent tax changes, demand has generally been concentrated on lower price brackets. However, there are initial indications that the stamp duty increase in December 2014 is slowly being absorbed, with the higher transactional costs being factored into pricing at the outset. But taxation remains a live issue. The 3% surcharge for additional homes which came into effect from April means that prime second-home markets are likely to remain price sensitive.
Agents note that there was a spike in second-home sales ahead of the introduction of the additional levy.
In the short term, uncertainty surrounding the outcome of the EU referendum could have an impact on the market, causing some buyers to adopt a wait-and-see approach until after the vote.
Ralph Wyrley-Birch, Managing Partner at Mount & Minster chartered surveyors and estate agents in Lincoln, comments: “Since the financial crisis there has been a growing trend towards living within thriving towns and cities other than London. This has resulted in prime urban properties outperforming their rural counterparts across the UK. Across all the prime regional markets, urban properties are now on average 4.1% above their 2007 peak. Demand is strong in these locations, in part due to the high concentration of prime housing stock and good schools which make them attractive to families looking to upsize, but also thanks to a growing number of equity-rich downsizers looking to move to areas where they can have access to a range of good restaurants, shops and amenities.”
Costs are greatest in markets on the outskirts of the capital such as Elmbridge, St Albans and Guildford – perhaps unsurprisingly given average property prices tend to be higher in such locations. These markets have also been among the first to reap the benefits of the ripple effect of demand coming out of London. As regional economies continue to recover, more London buyers are expected to make this move. Lincolnshire is already seeing this tide of southern buyers making their way to our region, with excellent train links at both Grantham and Newark.