Prime country house prices in the UK have increased for the first time in two years but the market will remain price sensitive, according to analysts. Prices in the sector increased by 0.4% in the first quarter of this year which means that the annual decline in prices stands at 3.2% compared to 3.8% in the final quarter of 2012, the data from the latest Knight Frank Prime Country House Index shows.
The price of property under £2 million and those worth £5 million plus rose, while values continued to fall for houses worth £2 million to £5 million. Stock volumes also climbed, with 7% more properties coming to market than in the first quarter of 2012.
‘The modest rise in country house prices over the last three months marks the first reversal of the steady declines seen since the first quarter of 2011. Despite this increase, prices remain below the levels seen during the market trough in the wake of the financial crisis, and are roughly around the levels seen in 2004,’ said Gráinne Gilmore, head of UK Residential Research at Knight Frank.
However, more detailed data shows that price performance is becoming more dependent on property value, she pointed out. While average values of sub £2 million prime properties climbed between January and March, the value of houses worth between £2 million and £5 million continued to fall, taking the combined annual decline in this price bracket to 4.2%.
Gilmore explained that the higher 7% stamp duty charge for £2 million plus properties, introduced at last year’s Budget, remains a key factor in this multi speed market, and agents report that faltering confidence on city jobs and bonuses is also having an impact. Moving up to super prime £5 million plus homes however, the picture changes again. Prices for homes in this band rose in the first quarter, continuing the upward trend seen since the middle of 2011 amid increased competition for super prime properties as more international buyers enter the market.
‘The weakness of sterling coupled with the decline in values seen over the last few years have combined to make prime country property an attractive investment for those buying in foreign currencies,’ said Gilmore.
Some 55% of £5 million plus homes were sold to overseas buyers in 2012, up from around 40% in 2011 and 2010. One in four homes was bought by a buyer from Russia or CIS countries, while European buyers accounted for around one in 10 purchases. The Home Counties remained the hotspot for super prime country house transactions last year, with 82% of all such sales happening in these counties – this is up from 76% in 2011.
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‘North Surrey in particular consistently appeals to international buyers who are attracted to prestigious private estates such as St George’s Hill, Wentworth and the Crown Estate in Oxshott,’ said Rupert Sweeting, head of the Country department at Knight Frank. ‘Going forward, it is predicted that international buyers will continue to play a significant role in the super prime market. The combination of the buyers seeing the UK as a safer destination to be based than some of their home countries, as well as tax advantages to purchasing land and the continuing slide of sterling, make the UK an attractive investment destination,’ he added.
The index also shows that prices continue to outperform in key commuter towns. The average price of prime houses in Oxford have been rising for a year, and are now up nearly 5%, while prices in Esher have been rising moderately for three years, climbing by 20% over that period, although values are still around 10% lower than their 2008 peak.
It also indicated that pent up demand is starting to come to the market, for example, in Hampshire there has been a noticeable rise in buyers looking at the market who are determined to make their move despite no real change in the outlook for prices or the wider economy. The release of this pent up demand may well be seen in other areas over the rest of the year, the firm predicts.