Savills World Research UK Residential Spotlight Prime Regional Residential Markets Spring 2014 City living, country life What attracts buyers to prime urban locations and their rural counterparts? Taking advantage of the price gap Farmhouse vs manor house What buyers want from a property savills.co.uk/research This publication This document was published in March 2014. The data used in the charts and tables is the latest available at the time of going to press. Sources are included for all the charts. We have used a standard set of notes and abbreviations throughout the document. Glossary of terms n Mainstream: mainstream property refers to the bulk of the UK housing market with, for example, price movements monitored by reference to national and regional average values. n Prime: the prime market consists of the most desirable and aspirational property by reference to location, standards of accommodation, aesthetics and value. Typically it comprises properties in the top five per cent of the market by house price. Spring 2014 Foreword THE FIRST CURRENTS OF MARKET ELECTRICITY Prime country property has lagged behind London, but will the economic recovery give Summary buyers the confidence to exploit the value gap? The key findings s unlikely as it may Christmas. However, the fact 29% in appear in a previous the £500,000 to £1m price bracket are n We expect, as we enter the next phase of the life, before I became actively opposed to it suggests it is housing market recovery, house prices across the a researcher I worked viewed with suspicion by those who prime regional market to perform in line with prime as a land agent. aspire to own more valuable prime London. See pages 4/5 AI specialised in tax valuation. That property, even if it is currently out of often involved valuing random legal their financial reach. n There is broadly even demand across urban, interests in large country houses. village, and countryside locations, with a stronger Accordingly, I had the great pleasure Rise of urban prime preference for urban locations among downsizers. of working with two of our more With this in mind, the political rhetoric See pages 6/8 colourful country house agents, surrounding this contentious issue one of whom was always “electric” could easily interrupt the ripple effect n In the south east a third of buyers are looking or “on fire” and another who more from prime London, even if, on the to upsize compared to just a quarter looking often than not was involved in a chain flip side, its imposition could draw to downsize. This imbalance is likely to create of correspondence with either the money out of London to less competition for family housing stock and in turn Prime Minister or the Archbishop of expensive prime markets. may push up house prices. See pages 8/9 Canterbury. Secondly, we have seen a Both had a genuine love of prime continued rise of prime urban markets n We anticipate that 2014 will be the year when country property and looked to in the likes of Tunbridge Wells, the value gap between London and the prime London as the lead to see what Beaconsfield, Oxford, Cambridge, suburbs and inner commuter belt finally begins would happen next in their markets. Bath, Edinburgh and York, that has to narrow. See pages 10/11 Since 2008 they would have become not been matched by properties in impatient at being kept waiting for prime rural locations. This left us n In the period post credit crunch, the strongest the recovery, that has been so strong questioning whether the golden age regional performers have been those properties in the capital but which has been of the Country House had passed, located on private estates and dotted around the stubbornly reluctant to work its way to be confined to the sugar-coated fringes of London. See pages 12/13 into the regions. nostalgia of Downton Abbey. Yet, as we publish our first spotlight Our survey results indicate such on prime regional property, there is a thoughts are not the case. The feeling that the recovery is becoming traditional manor house is still the Contents more firmly entrenched in the prime property that would most appeal to regional markets, as the economic our buyers’ friends, though the reality recovery gives buyers the confidence is that, with the £2m price threshold, 04 Market overview to exploit the value gap between the farmhouse is more attainable for 06 Prime buyers survey London and the country. most as prospects get better. However, there have been some Similarly, there is still demand for 08 What motivates buyers? distinct trends in the past five or so renovation projects – more it would 10 London buyers years that are likely to shape the seem than for new builds, even prime regional market recovery. if London finishes are becoming 12 Private estates Firstly, in light of the changes to increasingly in vogue in the shires. 14 Farmhouse vs manor house stamp duty, a clear threshold in the So there is still reason to believe market at £2m has arisen, a reflection that were my former colleagues still of how tax policy can impact on plying their trade, the former would buyers’ psychology as much as their have reason to feel the first currents budgets. It is therefore no surprise of market electricity and the latter Lucian Cook that our survey of prime regional would be praising the Archbishop of UK Residential buyers were distinctly opposed to a Canterbury for having a word with the 020 7016 3837 mansion tax. You could argue this is man upstairs to kick start a recovery [email protected] simply because turkeys don’t vote for in the prime regional markets. n Twitter: @LucianCook savills.co.uk/research 03 Spotlight | Prime Regional Residential Markets Market overview CITY LIVING, COUNTRY LIFE The recovery has finally begun cross both the prime mainstream housing market began London and prime to see price growth, so too did the in the prime regional markets regional markets, prime regional markets, albeit not but which locations are average values fell at the same rate. Since December by -20% over the 18 2012 values in the UK mainstream benefitting the most? monthsA from the 2007 peak to the markets (excluding London) have trough in March 2009. However, seen a growth of 6.1% according to over the past five years there has Nationwide compared to a growth of Words: Sophie Chick been a significant divergence in 5.1% in the prime regional markets. Twitter: @SophieChick performance. Behind this general picture, it is House prices in prime London have clear that different property types and seen continuous strong growth since locations have reacted differently to their trough, increasing on average changing market conditions. by 73.0%, resulting in average values “We expect the trend now reaching 36.2% above their Location, location for urban living to 2007 peak. In the regions, however, Most apparent is a clear geographical there was a different picture. While divide. The markets with the closest continue” Sophie Chick, prices started to recover in 2009, links to London have seen the Savills Research by mid 2010, as it became apparent strongest recovery, benefitting from the recession was continuing, values a flow of housing wealth generated began to fluctuate and to experience in the capital. Average house prices small falls. This continued for two and in both the prime suburbs – locations a half years until the end of 2012. still within the M25 – and the inner The turning point in the market commute – locations between 30 happened in early 2013. As the minutes and an hour’s commute to London – have reached their 2007 GRAPH 1.1 peak levels. Prime property price movements If your property was worth £1m However, while all regions have now seen positive annual growth, in 2007, what would it be worth now? there is still a value gap between London locations outside commuter territory £1,400,000 £1,362,000 and the rest of the UK. Average £1,350,000 house prices in the wider south of £1,300,000 England are currently -11.0% below £1,250,000 Outer commute their 2007 peak and in Scotland that city locations figure falls further to -22.5% below. £1,200,000 £1,154,000 £1,150,000 Town vs country £1,100,000 Geographical location is not the only driver of house prices. Since the £1,050,000 Suburbs downturn there has been a growing £1,000,000 All locations fell £1,069,000 by around 20% trend towards living within thriving £950,000 towns and cities other than London. This has resulted in prime urban £900,000 UK £935,000 properties outperforming their rural £850,000 counterparts across the UK. £800,000 Across all the prime regional £750,000 Coastal markets, prime urban properties are £843,000 now on average just 3.4% below £700,000 their 2007 peak, compared to Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar 07 08 08 09 09 10 10 11 11 12 12 13 13 14 their neighbouring village and rural locations which are lagging behind Source: Savills Research at -11.2% below. This has been 04 Spring 2014 particularly evident in the prime cities given the focus on the taxation of taxation of high value property risks in the outer commuter zone, notably high value property that has already a period of sobriety. ‘little London’ locations such as resulted in increased stamp duty However, on the assumption Oxford, Cambridge and Winchester. above £2 million.