Prime country house values fall further on 1st anniversary of credit crunch


Date: 15th September 2008  | PDF Version

Key Highlights:

Andrew Shirley, Knight Frank’s head of rural property research commented:

“First birthdays are usually something to celebrate, but on the face of it there doesn’t seem to be much to cheer about as the credit crunch, which hit the UK last August, enters its second year. For the second consecutive quarter the Knight Frank prime country house index has recorded the biggest drop in its history.

“Average prices fell by 4% during the third quarter of 2008 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.

“Vendors were slower to cut guide prices in this sector of the market, hoping the credit crunch would not affect them. But they have now realised 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 £5m 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.

“The picture across the south of England and Wales is uniformly gloomy, but the market in the north of England and Scotland continues to bear up, with an annual fall of under 1% in Scotland and a 5% increase in north-east England.

“Although it appears that the north-east is bucking the national trend, this area didn’t see the rapid price growth experienced by other regions in 2006 and 2007. This means, even without prices falling, it still looks good value to buyers. An extremely limited supply of prime property here is also helping to bolster prices.

“Now that the prime sector appears to be in step with the general housing market it will be interesting to see if this continues or whether there is a sharper correction still to come at the top of the market.”

Rupert Sweeting, Knight Frank’s head of country department said:

“The prime country house market now seems more aligned with the general economic cycle so it’s not surprising that the lower end of the market, which is more dependent on credit, is suffering the most. Cottages and farmhouses are being particularly affected by the drop in demand for holiday and second-homes.

“On a more positive note, we have seen a sudden upturn in activity during the first half of September and have arranged a lot more sales than over the summer. I think this reflects a realisation by vendors that they need to be realistic when it comes to setting guide prices. Subsequently, this has encouraged those who have been thinking of buying for some time to take the plunge.

“Looking forward, it’s extremely difficult to predict where prices are heading. But if, as many economic analysts are predicting, we do see some interest cuts soon that will hopefully inject some much-needed optimism into a market that has been suffering from a dearth of good news.”

Price property performance by sector

Property Type Quarter 3 price change % Annual price change % Average value £
Cottage -4.6 -11.1 0.5m
Farmhouse -4.5 -7.5 1.2m
Manor House -2.8 -5.0 3m
Unweighted average -4.0 -7.9 1.5m

Prime property performance (all types) by region

Region Quarter 3 price change % Six-month change % Annual change %
South East -4.8 -8.9 -7.8
South West -3.8 -9.0 -8.3
East -4.5 -6.4 -10.8
East Midlands -4.3 -6.0 -9.2
West Midlands -4.1 -8.1 -10.2
Yorks/Humber -2.8 -3.9 -1.2
North East -1.1 -1.6 +5.2
North West -2.6 -4.1 -2.6
Scotland -1.0 -1.6 -0.8
Wales -3.7 -7.9 -8.4

For further information, please contact:

Andrew Shirley
Head of Rural Property Research, Knight Frank
+44 (0)1908 302938
+44 (0) 7779 585 313
andrew.shirley@knightfrank.com

Rupert Sweeting
Head of Country Department, Knight Frank
+44 (0) 207 861 1078
+44 (0) 7836 260 236
rupert.sweeting@knightfrank.com


Davina Macdonald Lockhart
Residential PR Manager, Knight Frank
+44 (0) 207 861 1033
+44 (0) 7796 996 154
davina.macdonald.lockhart@knightfrank.com

Ends

Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner, Newmark Knight Frank, operate from 196 offices, in 38 countries, across six continents. More than 6,770 professionals handle in excess of US$700 billion (almost £355 billion) worth of commercial, agricultural and residential real estate annually, advising clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit www.knightfrank.com.


About Residential Research
Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, financial and corporate institutions. Our research reports are available at www.knightfrank.com/research


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