There are signs of a seasonal pick-up in activity in country house markets, but higher mortgage rates are keeping demand in check, says Knight Frank.

The agency says there is a strong sense of déjà vu as the prospect of a rate cut becomes more remote with each release of economic data and mortgage costs edge higher.

It was therefore not a surprise that the Bank of England held rates last Thursday, although two members of the nine-strong rate-setting committee voted to cut, compared to one last time.

It says a June cut feels more plausible, although swap markets seemed to largely shrug their shoulders following the Bank’s decision.

The outlook for the UK housing market will improve when services inflation (driven by factors including wage growth) starts to fall noticeably from its current level of 6%.

Knight Frank anticipates that the overall inflation figure is likely to move closer to the Bank’s 2% target when it is next released on May 22 but the headline number will be helped by a lower energy price cap from April. Services inflation will prove far stickier.

Residential research head Tom Bill says: 

“The result of this economic uncertainty for the property market is a greater proportion of buyers moving because they need to, for reasons such as schooling and employment, compared to discretionary purchasers. It means activity is stronger in areas like south-west London than prime central London.

“It also means the outlook is brightening for property markets outside of the capital, which are typically more needs-driven and linked to seasonal patterns of higher activity in spring and autumn.

“Higher mortgage rates remain the key problem, but activity outside of London has not been helped so far this spring by the fact UK rainfall was 155% above the five-year average in April and there was a corresponding 35% fall in the number of hours of sunshine.

“Despite the poor weather, the number of offers made between £1m and £2m in the country was 5% higher than the five-year average (excluding Covid-hit 2020) in the four weeks to early May.

“When you consider how strong the market was in spring 2021 and 2022 during the ‘escape to the country’ boom, that’s a high bar.

There was an equivalent decline of 4% between £2m and £5m, which also paints an improving picture but reflects the larger proportion of discretionary buyers in higher price brackets.”

Knight Frank Country data relates to a range of rural and urban £750,000-plus property markets across England and Scotland.