The rate of prices falls across London’s prime property markets has slowed significantly since the beginning of the year and there are early signs that values are bottoming out, the latest research suggests.
At the same time, the prime regional markets in the UK continue to see modest price growth, according to the quarterly prime market indices from international real estate adviser Savills.
In the first quarter of 2017 price falls averaged just 0.3% across the prime London housing market as a whole, where values average around £2 million, compared to falls of 2.2% in the final quarter of 2016.
This leaves values down 6.1% down from their 2014 peak with the market being affected by both the decision to leave the European Union and rising stamp duty which has had an impact on activity.
The prime regional markets continue to show modest growth, with prices up 0.8% on average in the first three months of the year and up a total of 4.4% since the end of 2014.
Savills points out that these generally lower value markets have been less exposed to factors causing London to falter, not least because they did not rise to anything like the same extent post credit crunch. As such, they also still represent relative value compared to the UK capital.
In prime central London, where prices average around £4 million, values fell 0.8% compared to a fall of 2.1% in the preceding quarter, leaving them down 13.2% from the peak of the middle of 2014.
Even at the very top end of the market, in the £10 million plus range, values appear to be stabilising, and the index report says this is thanks in some part to the currency advantage attracting non sterling denominated buyers into play. In other parts of London, which tend to have a more domestic buyer profile, and are therefore more affected by the lending environment, prime values flat lined in the quarter.
‘Brexit uncertainty has compounded the cooling effect of stamp duty, but it now looks as though values are finding their level and where asking prices reflect this, buyers are coming back into the market,’ said Lucian Cook, head of UK residential research at Savills.
‘However high levels of over-priced stock remain in the market, some still pegged to peak values, suggesting we have probably not yet seen the end of asking price cuts. And though it looks as though the bulk of value falls are behind us, with article 50 to be triggered this week, we expect the market to ebb and flow for the next two years, in step with the news agenda,’ he added.
Prime property prices in the other UK regions recorded marginal price growth in the first quarter. That means all regions are showing modest annual price growth, with the exception of stock located in the suburbs on London’s fringes.
At a regional level, the strongest year on year growth has been seen in and beyond the outer ring of the commuter zone between 30 to 60 minutes by train from London, albeit confined to 2.4% and 2.6% respectively.
But these averages conceal real variation at a more local level. The report explains that buyers continue to favour urban and village locations over rural, and the market for the best housing in the likes of York, Chester, Bristol and Edinburgh, have been markedly more robust than for neighbouring rural property.
The country house market, which has struggled to gain momentum over recent years, saw values rise by a marginal 0.8% in the first quarter of 2017. Savills says that a shortage of open market stock and buyers who remain slow to commit, continue to suppress transaction volumes, but like London, the country house market appears to be seeing the end of price falls.
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