The value of prime country houses dropped by 4% over the third quarter this year, but the most expensive homes have seen the smallest falls.
On the first anniversary of the credit crunch, Knight Frank’s prime country price index (www.knightfrank.co.uk) shows this is the most severe quarterly fall since the research began in 1995.
The index has now descended by nearly 8% over the last year.
Andrew Shirley, Knight Frank’s head of rural property research, says, ‘Average prices fell by 4% during the third quarter, adding to the 3.9% slide already experienced in the second three months of the year.
‘Prime country houses are now worth, on average, 7.9% less than a year ago, bringing them broadly in line with the general housing market for the first time.’
Mr Shirley points out that vendors have been slow to cut guide prices in this sector of the market, hoping the credit crunch would not affect them. But they have realised now they are not immune to the downturn and are agreeing to lower their expectations.
‘However, those at the top end of the market are suffering the least. While cottages are now worth 11% less than they were 12 months ago, manor houses have lost only 5% of their value.
‘At the very top of the market, those houses valued at over £5 million are still worth slightly more than this time last year. Prices, however, have dropped by almost 3% in the past three months and we could be looking at the first year-on-year fall for these “trophy” properties by the New Year.’
While the picture across the south of England and Wales is somewhat gloomy, the north of England and Scotland continues to bear up, with an annual fall of under 1% in Scotland and a 5% increase in the north east.
‘Although it appears the north east is bucking the national trend, this areas didn’t see the rapid price growth experienced by other regions in 2006 and 2007,’ adds Mr Shirley. ‘This means, even without prices falling, it still looks good value to buyers. An extremely limited supply of prime property here also is helping to bolster prices.’
Rupert Sweeting, Knight Frank’s head of the country department, suggests on a more positive note, there has been an upturn in activity during the first half of September and more sales have been arranged over the summer.
‘I think this reflects vendors accepting the need to be more realistic when it comes to setting guide prices,’ says Mr Sweeting. ‘Subsequently, this has encouraged those who have been thinking of buying for some time to take the plunge.’
Looking forward, it is extremely difficult to predict where prices are heading. ‘But if, as many economic analysts are predicting, we do see some interest cuts soon, they will hopefully inject some much-needed optimism into a market that has been suffering from a dearth of good news.’