Steady growth forecast across UK prime property markets

Annual price growth across the prime country property market currently stands at 0.2% over the year to September 2017. Our expectation is that values will end the year relatively unchanged compared with 2016. Performance is increasingly influenced by value, something which is expected to continue through 2018. We are forecasting price growth in prime markets across England and Wales of 1.5% in 2018 and of 2.0% in 2019.

What has happened over the last year?

Our view – backed up by the latest figures from our Research team – is that prime country property values have been fairly flat over the last year. The market continues to adjust to higher rates of stamp duty, as well as recent political events including the snap General Election and ongoing Brexit negotiations.

There are, however, a number of positive signs, with an increase in both new prospective buyer registrations and property viewings suggesting a healthy level of interest in prime property. We’ve also seen a pick-up in terms of sales volumes particularly at the top end.

What impact will Brexit have on the market?

The general feeling is that the nervousness generated by Brexit is receding. In fact, the figures show that Knight Frank sales activity outside of London is up by 7% on the same time last year. But that’s not to understate the potential risk. A less than favourable deal, or the absence of a stable transition period, may result in second-round economic effects which could have a knock-on impact for prime markets. Our forecasts assume a Brexit deal, but with a two year transitional period.

What about stamp duty, is that still a concern?

In a word, yes! However, increasingly we are seeing vendors factoring the higher levy into asking prices, which suggests the market is absorbing most of  the changes, where this has happened, sales are taking place. Properties valued between £4 million and £5 million, for example, have seen prices decline by more than 5% over the last year.

What are the key opportunities in this environment?

Location remains key for most of our buyers, especially those relocating from London, but with technology improvements making working from home for all or part of the week a viable option we do see potential in more rural prime markets because of the relative value now on offer.

Additionally, improvements to transport infrastructure, such as new road and rail links, mean that those who can be flexible in the way they work are often happy to extend their search outside the magical ‘one-hour train ride to London’ zone, especially if they are only travelling into the capital for one or two days a week. 

Where does it leave us going forward?

Our view is that pricing will remain relatively flat in the short-term. While there have been encouraging signs in terms of a pick-up in activity this year, stock levels at the top end of the market remain low in a number of locations. The main drivers of prime markets remain unchanged, however. Buyers will continue to move because of education, quality of life and the ripple effect out of London. These will underpin the market going forward.