Prices across the prime regions steady following a summer of adjustment
Nick Maud, Director, Residential Research
Unprecedented speculation around the future of the property tax regime filled the usually quiet summer news cycle. A variety of proposals were mooted, from the restructuring of stamp duty land tax and council tax, to an increase in capital gains liability above a certain threshold. It must be emphasised, however, that none of these briefings have received firm backing from the Treasury as yet. Nevertheless, with a late Budget date of 26th November confirmed, a further layer of uncertainty once again shrouds the property market until more policy detail is revealed.
And while we’ve seen prices continue to fall across prime regional markets, the pace appears to have slowed compared with earlier in the year. In the three months to the end of September, average prices in the prime regions decreased by -1.3%, contrasted with declines of -1.8% over the equivalent period to the end of June.
There are some exceptions; while prices in Scotland were the most resilient of the regions over the past three months at -0.2%, this measure of growth has dipped back into negative quarterly territory for the first time since the end of December. Elsewhere, in the Midlands and the North, prices remained broadly steady from -0.4% at the end of June to -0.5% at the end of September. And, across the inner commute zone, they softened slightly from -1.4% to -1.6% over equivalent periods.
In southern England, suburban locations closest to the economic centre of London experienced the most resilience over the quarter at -0.9%, but the Wider South saw the biggest improvement from -3.3% at the end of June to -2.1% at the end of September.
Activity within locations that traditionally appeal towards second home owners has felt the impact of tax changes over the past year. Most prominent among these are the increase to the stamp duty surcharge for second homes, and the application of a 100% premium to council tax for the same property type by certain boroughs. These, in conjunction with an unwinding of post-pandemic trends, have conspired to suppress pricing in second home havens, such as the coastal regions and the Cotswolds. But again, average prices here are showing signs of stabilisation, declining at a slower rate. Prime coastal prices stabilised from -2.9% over the three months to the end of June, to -1.7% at the end of September; over the same periods, price falls for the Cotswolds improved from -5.0% to -2.8%. And overall, average prices for prime country houses as an asset class also saw milder declines.
From country to town, urban locations have generally proven more resilient than their rural counterparts over the past quarter. This indicates persistent demand from needs-based buyers, seeking a home closer to economic and employment hubs. The result has been that average prices for urban areas in the UK have fallen by -0.8% compared with -1.6% across rural areas. In England, more urban suburban locations around London have been the most robust at -0.7%, as have those in the Midlands and North at -0.6%. Again, Scottish prime urban locations are the strongest performers, remaining just in positive territory at +0.2%; this was buoyed largely by the City of Edinburgh, with localised supply dynamics at play.
Data from TwentyCi on the prime regional market at £1 million and above suggests that growth in net agreed sales has been more resilient than expected. Transactions saw a 3% increase in the year to September, albeit still down from 9% over the year to August and 11% earlier in the summer.
New instructions at this level fell by -5% over the twelve months to September, which represents an improvement on the -15% observed over the previous annual period, while still remaining in negative territory. And, with the level of price changes rising to 11% over the last twelve months, having remained flat over the year to August, this shows that some sellers are still willing to adjust their expectations to get the deal done.
In the run-up to the Budget, we expect to see an underlying seam of activity persist among domestic buyers. However, given the breadth of policy ideas floated over the summer, those transacting at higher price points may feel more exposed and will be more likely to keep their powder dry – at least until there is greater certainty on the direction of travel. The result may be that sales activity among these more discretionary homes remains suppressed for the immediate term.
Nevertheless, on the sellers’ side, there is a segment who will persevere, and recognising the continued presence of motivated buyers in the market, seek to press ahead with their sale regardless of broader factors. And indeed, the corresponding pool of buyers may see some growth in the immediate aftermath of the Budget, with the benefit of greater certainty.
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