Cities Coming Back! Prime regional markets buck pandemic trend

Higher interest rates mean UK prime regional house values continued to soften over the three months to the end of June.

This is according to the data from Savills which says 2023 is seeing an increasingly price sensitive market.

The average says prime values across UK markets outside of London – broadly the top five to 10 per cent of the market by value – slipped by 1.5 per cent in the second quarter, leaving them 3.5 per cent down year on year, yet still 12.1 per cent up since the first lockdown in March 2020.

In contrast to a prominent pandemic trend, Savills says city markets are proving more resilient than their more rural neighbours, though while the ‘move to the country’ trend may have slowed, it has not stalled.

“With increasing pressure on buyers’ budgets, committed sellers need to price in a way that reflects the prevailing macroeconomic conditions to achieve a sale” says Frances McDonald, director in the Savills residential research team.

“But the work-life balance has had something of a reset over the past six months, which has helped  underpin values in prime city locations across the country which are now marginally outperforming.  Ease of access to transport, work and amenities are once again priorities that trump lifestyle considerations for some buyers.”

Over the past year, high value housing markets in key regional cities saw price falls of just 1.4 per cent while village and rural house prices fell by 3.7 and 3.9 per cent respectively, eroding some of the sizeable gains of the past few years. 

The agency says the impact of the work-life balance reset has been most keenly felt in the suburban and commuter markets – typically home to families and highly leveraged upsizers – where buyers have increasingly prioritised proximity to stations with direct links into London.  

The inner commuter belt, within a 30 minute train journey of London, has experienced the most significant price falls over the past year, of 5.2 per cent on average.

By contrast, prime markets furthest from London - including the Midlands/North of England, Scotland and Wales, where mortgage affordability is least stretched - have outperformed with less downward pressure on prices. 

Across the UK’s prime regional markets, while down on last year, new buyer registrations are currently standing up well to pre-pandemic levels.  

In June, they remained 17 per cent above June 2019, and while supply constraints have eased, stock levels are still five per cent down, Savills reports. 

The more discretionary country house market saw values slip by 1.5 per cent in the second quarter and by 4.4 per cent year on year, but the averages conceal significant regional variation.

In Scotland, the country house market represents great value relative to other locations and significant launches continue to attract strong buyer interest.  

As a result, the market recorded marginal 0.5 per cent price growth in the quarter, in stark contrast to the South East of England where values fell by 4.9 per cent.

In these discretionary markets, lifestyle considerations continue to trump more practical concerns.  

For example, properties in coastal locations recorded the smallest falls, down just 1.0 per cent in the quarter and by 3.8 per cent year on year, meaning  values remain up 20.2 per cent since the first lockdown in March 2020. 

“The mortgage markets settled much quicker than expected at the start of the year, but with rates accelerating again, we are starting to see increased price sensitivity, particularly, though by no means exclusively, in markets closest to London which are more reliant on borrowing” says McDonald.

“It’s vital that buyers and sellers align on price. Sellers who are realistic on pricing are continuing to command the most interest, and are ultimately achieving a higher price.”