The market for prime country houses, traditionally less volatile than that of London, is still performing well in the face of the credit crunch says new research from Savills. It found that although values in prime central London fell by 2% in the last quarter of 2007 there was no overall downward movement in prime regional values.
The annual rate of growth for this category now sits at 8.7% for the year, down from a high of 12.6% earlier in the year, but still remains higher than the average UK growth, and the market for property over £4m has been the most resilient to the general slowdown, Savills said. Overall annual growth for these properties is now 14.3%.
This is because buyers at this price point tend not to be dependent on fluctuations in city trading and bonuses, and the relative rarity of such properties means that demand, particularly from foreign high net worth individuals, will more likely than not outstrip supply.
One area which stands out as showing remarkable ongoing growth, is prime Scottish property. The report says: ‘The continued growth of domestic Scottish wealth has supplemented demand from both England and overseas. It has been a major driver especially in the prime markets of Edinburgh and its hinterland.’
The market in the north of England and the Midlands is slower, and in fact fell by 1% year on year as the markets which benefited from great increases in value in 2004 were the first to be affected by signs of a slowdown.
Areas like the South West which now contain significant amounts of second homes were also first to be affected as prices failed to continue to grow at the same pace they were last year. ‘This illustrates the greater volatility of these markets, which are dominated by discretionary purchases (investors, second home owners and retirees) as opposed to needs based buyers, and therefore are the first to be sacrificed following a downturn in spare cash and reduced confidence in the sector,’ says the report.
As the year goes on the agent says it expects the prime residential market to continue to be more resilient than the mainstream market, and that the prospect for growth in values in the second half of the year is dependent upon how long it takes for the credit markets to ease, and the prospects for growth or recession in both the US and UK economies.