Prime house prices continue to fall says Savills

Continued domestic and geopolitical uncertainty have eroded buyer and seller confidence at the top end of the market, according to the latest research by international real estate advisor, Savills.  

It states:

As a result, the prime market has continued to be more price sensitive than its mainstream counterpart, though the markets remained active with slightly less activity than the same period last year. Prices have fallen across the prime markets, with the prime Scotland and the North of England the most robust.

“The prime housing market is becoming increasingly cautious. When surveyed, Savills agents agreed that confidence among both prospective buyers and sellers is continuing to soften. Taken before the Makerfield by-election and the Prime Minister’s resignation but against a backdrop of ongoing uncertainty in the Middle East, this decline in market sentiment has been reflected in further price falls as buyers have tightened their budgets ’ comments Frances McDonald, director of residential research at Savills.

‘But at the same time, sellers have also reined in their price expectations, And the increasing alignment in expectations, has supported ongoing market activity despite a thinner seam of demand.’

Statistics from TwentyCI show that throughout Q2, net agreed sales were within 95% of last year’s levels for the whole market. For the market above £1million it was 94%, and above £2 million, 91%.

Outer prime London markets lead

As a result of this heightened uncertainty, prices have fallen by -1.7% in Prime Central London over the past three months, a similar pace to the price falls seen in the lead up to last year’s Budget.  Values in this rarefied market now sit at -26.3% below  its 2014 peak.

The majority of agents report that the tax environment is continuing to weigh on international demand, with nearly half saying international demand had reduced in London. While the pace of falls this quarter has picked up across all parts of Prime Central London, there is some variation, with areas such as  Notting Hill continuing to benefit from needs based demand for family housing, recording annual price falls of less than -4%.compared to falls of -7% across more fringe central London neighbourhoods such as Westminster and Pimlico.

Domestic markets outperform

Despite another bout of  mortgage volatility, the more domestic Outer Prime London markets continue to be more resilient, with prices falling by -1.1%  overall (and just -0.7% for houses as opposed to flats), during the second quarter of the year. In particular, value in West and South West London have held up well over the past year falling by just -1.2% and -1.5%, respectively.

Frances McDonald, Savills research director,  comments, ‘Best in class properties in areas such as Barnes, Clapham and to the east Hackney and Victoria Park still command a premium, especially those which don’t come to market very often. Where there is the opportunity to acquire what could be a once in a generation home buyers remain motivated and correctly priced properties are going to competitive bidding, with buyers being prepared to pay for something that fulfils all their criteria.’

Prime regional: Urban markets out perform

Across the prime regional markets values are down by -1.7% in Q2 and -3.8% annually, with prices in the debt-driven commuter belt markets and the more discretionary, top end country house market most affected. Although there is still appetite for the exceptional country house.

Generally, needs-based urban markets are outperforming their more rural surrounds as the market here rebalances post Covid, with Edinburgh and Cheltenham among the strongest performers.

‘While the market for rural properties has become noticeably more sticky, values in urban locations are holding up better. Driven by needs based buyers these markets benefit from the connectivity, good transport links and a demand for schools and have shown more resilience compared to the more discretionary rural markets.’

Savills survey also shows that almost all agents surveyed said deals were taking longer to progress and specifically a delay in time between offer accepted and exchange.

“The time taken for deals to reach exchanges is reflective of the caution in the market, this lack of urgency is the polar opposite of what we experienced during the mini housing market boom, that now seems a distant memory.

“Given domestic political uncertainty, we expect the prime market to remain price sensitive over the remainder of the year, despite the prospect of less geo-political uncertainty and a recent tempering of mortgage rates” concludes McDonald.