MARKET UPDATE The underlying demand for prime property across England and Wales remains strong with Knight Frank figures showing an increase in offers made and properties sold subject to contract. Prime property prices in regional markets in England and Wales fell by 0.8% over the first three months of 2019, the third consecutive quarter that average prices have fallen. The annual change in values over the 12 months to March stood at -1.8%. While still only a modest drop, this was the biggest fall in five years. Recent performance in regional markets reflects heightened political uncertainty surrounding the UK’s planned exit from the EU. A lack of clarity about the outcomes and timings has resulted in caution among some buyers and sellers in prime residential markets. Despite this, properties priced to reflect current market conditions continue to attract buyers. Knight Frank figures show a 5% increase in the number of offers made so far in 2019 compared with the previous year, and a 22% rise in properties sold subject to contract, highlighting the strength of underlying demand. It remains the case that there are variations in price performance depending on location with prime markets closest to the capital feeling the effects of a weaker London market. Values in North Surrey, for example, fell by nearly 3% annually. Elsewhere, average prices in markets across the North Thames and Chilterns dipped by 5.4% over the 12 months to March. Generally, more moderately priced properties have been resilient. Property worth up to £1 million fell by a relatively modest 0.7% annually, while £2 million-plus properties have fallen by an average of 2.5%. The prime market is expected to remain subdued in the short-term, with Brexit leading the headlines and impacting on housing market sentiment. However, when the political uncertainty recedes we expect underlying demand to crystallise into more activity. This, along with the relative value on offer in most prime regional housing markets, especially when compared with London, should underpin a modest increase in values of 0.5% in 2019. On a longer term basis, we are forecasting cumulative growth of 8.2% between 2019 and 2023. KEY FACTS FOR Q1 2019 QUARTERLY CHANGE IN PRIME REGIONAL VALUES OVER THE 3 MONTHS TO MARCH -0.8 % THE ANNUAL CHANGE IN PRIME REGIONAL VALUES OVER THE 12 MONTHS TO MARCH -1.8 % 8.2 % FORECAST INCREASE IN PRIME REGIONAL VALUES BETWEEN 2019 AND 2023 -5% -4% -3% -2% -1% 0% 1% 2% over £5m £4m to £5m £3m to £4m £2m to £3m £1m to £2m £500k to £1m FIGURE 1 PRIME PRICE CHANGE BY VALUE Annual % change Source: Knight Frank Research Oliver Knight, Residential Research [email protected]PRIME COUNTRY HOUSE INDEX Q1 2019 THERE HAS BEEN A 22% YEAR-ON-YEAR INCREASE IN PROPERTIES SOLD SUBJECT TO CONTRACT (JAN-MARCH) THE NUMBER OF OFFERS MADE ON PROPERTIES INCREASED BY 5% YEAR- ON-YEAR (JAN-MARCH)
Transcript
MARKET UPDATEThe underlying demand for prime property across England and Wales remains strong with Knight Frank figures showing an increase in offers made and properties sold subject to contract.
Prime property prices in regional markets in England and Wales fell by 0.8% over the first three months of 2019, the third consecutive quarter that average prices have fallen.
The annual change in values over the 12 months to March stood at -1.8%. While still only a modest drop, this was the biggest fall in five years.
Recent performance in regional markets reflects heightened political uncertainty surrounding the UK’s planned exit from the EU. A lack of clarity about the outcomes and timings has resulted in caution among some buyers and sellers in prime residential markets.
Despite this, properties priced to reflect current market conditions continue to attract buyers. Knight Frank figures show a 5% increase in the number of offers made so far in 2019 compared with the previous year, and a 22% rise in properties sold subject to contract, highlighting the strength of underlying demand.
It remains the case that there are variations in price performance depending on location with prime markets closest to the capital feeling the effects of a weaker London market. Values in North Surrey, for example, fell by nearly 3% annually.
Elsewhere, average prices in markets across the North Thames and Chilterns dipped by 5.4% over the 12 months to March.
Generally, more moderately priced properties have been resilient. Property worth up to £1 million fell by a relatively modest 0.7% annually, while £2 million-plus properties have fallen by an average of 2.5%.
The prime market is expected to remain subdued in the short-term, with Brexit leading the headlines and impacting on housing market sentiment. However, when the political uncertainty recedes we expect underlying demand to crystallise into more activity.
This, along with the relative value on offer in most prime regional housing markets, especially when compared with London, should underpin a modest increase in values of 0.5% in 2019. On a longer term basis, we are forecasting cumulative growth of 8.2% between 2019 and 2023.
KEY FACTS FOR Q1 2019
QUARTERLY CHANGE IN PRIME REGIONAL VALUES OVER THE 3 MONTHS TO MARCH
-0.8%
THE ANNUAL CHANGE IN PRIME REGIONAL VALUES OVER THE 12 MONTHS TO MARCH
-1.8%
8.2%FORECAST INCREASE IN PRIME REGIONAL VALUES BETWEEN 2019 AND 2023
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
over £5m£4m to£5m
£3m to£4m
£2m to£3m
£1m to£2m
£500kto £1m
202320222021202020192018
0.6%0.5%
1.5% 1.5%
2.0%
2.5%
FIGURE 1 PRIME PRICE CHANGE BY VALUE Annual % change
THERE HAS BEEN A 22% YEAR-ON-YEAR INCREASE IN PROPERTIES SOLD SUBJECT TO CONTRACT (JAN-MARCH)
THE NUMBER OF OFFERS MADE ON PROPERTIES INCREASED BY 5% YEAR-ON-YEAR (JAN-MARCH)
URBAN V RURALPrice movements also varied by property type, with longer-term performance highlighting some stark differences. Manor houses, for example, have reported modest growth of just 0.8% during the past five years, compared with growth of 19% and 24% respectively for cottages and townhouses over the same period.
This mirrors a wider trend of outperformance within the market for properties located in urban town and city settings, relative to more rural counterparts.
Strong price growth in the years following the financial crisis in areas including Bath, Bristol, Cheltenham and Oxford means values for prime homes in urban locations have surpassed pre-financial crisis peaks. Rural properties by comparison remain more than 10% below peak levels.
This relative value could help drive demand in more rural markets in 2019.
FIGURE 2 PRIME REGIONAL PROPERTY VALUESAnnual and quarterly % change
FIGURE 4 PRIME REGIONAL PROPERTY VALUES Quarterly change
PRIME COUNTRY HOUSE INDEX
Cottage Farmhouse Manor house Town house Unweighted average
2018 Q1 1.3% -0.7% -1.7% 2.5% -0.3%
2018 Q2 1.0% -0.2% -1.2% 1.9% 0.1%
2018 Q3 -0.2% 0.0% -1.0% 1.2% -0.1%
2018 Q4 -0.8% -0.4% -1.0% -0.3% -0.6%
2019 Q1 -1.7% -0.9% -2.7% -1.7% -1.8%
Source: Knight Frank Research
Annual change
Cottage Farmhouse Manor house Town house Unweighted average
