Country house prices have risen by up to £875 a day over the last year ? the highest rate of growth since June 2004. The Knight Frank Prime Country House Index shows annual growth of 10.7% in prime country house prices, a figure Knight Frank attributes to London bonuses and a shortage of supply. ‘The key themes underpinning the prime country house market UK, but especially the south of England, is firstly the health of the service sector economy and in particular the wall of money which is being generated in central London in the City and Canary Wharf; secondly the shortage of supply which has become critical in many markets across the UK,’ said Rupert Sweeting, head of Knight Frank country department.
The country house market was flat during 2004 and 2005, according to Knight Frank, but since last October enquiries have been flooding in. ‘The phones began to ring from the end of the month and into November and have never really calmed down,’ explained Mr Sweeting. Manors, cottages and farmhouses have all benefited from outstanding price growth and larger properties priced over £3 million have experienced a 16% price rise over the last 12 months. ‘The third quarter of 2006 has seen a strengthening of the boom in the UK prime country house market,’ commented Liam Bailey from Knight Frank, ‘On the back of an exceptional year in central London, London buyers are taking advantage of high price growth and are taking money out to the country.’
Growth of prime country houses is the fastest recorded since mid 2004, prompting Knight Frank to rethink its previous forecast of 8% price growth for 2006. ‘Very strong performance in the prime country house market in recent months underpins our forecast that this market, and in particular the most expensive properties, will outperform in 2006,’ said Mr Bailey. ‘Our forecast is that prices of prime country properties will grow by 11% this year, with price growth of up to 16% for the very best properties.’
Knight Frank expects the 2007 bonus round to bring about the same phenomenon. ‘Early indications are that bonuses will be high, demand will be higher that last year and the market will begin to shift into a high gear from the end of October,’ said Mr Sweeting, ‘The difficulty this time compared to last year is that we will be moving into the bonus market with very low stock levels, putting even greater strain on prices.’
New data from both the Halifax and Nationwide shows the annual rate of house price inflation slowed a little in October, causing experts to ask whether the peak of the current house market upswing has been reached. ‘Higher mortgage rates following the Bank of England’s rate rise in August and the increase in fixed rates over the past five months are expected to dampen housing demand over the coming months,’ explained Martin Ellis, Halifax chief economist.
But according to some experts, a November rate rise, will not rule out a reversal of October’s flattening market. ‘Prices rose by a relatively modest 0.3% last November, so another monthly rise of 0.7% next month would push the annual rate up to 8.4%. Moreover, the sharp jump in mortgage approvals in September scarcely suggests that house price inflation is set to cool materially over the next 2-3 months,’ commented property economist Ed Stansfield.’