Muted annual price growth…

Prime London house prices have fallen by an average of -3.6% from their peak of 2014 and by substantially more in the central London markets.

By contrast, the prime regional housing markets of England, Wales and Scotland have shown headline price growth, albeit modest. Over the past year, growth has ranged from 3.6% in the outer commuter belt, between 30 and 60 minutes travel time from the capital, to just over 1.0% in the Midlands and North of England and Scotland.

…but no growth in the past quarter

No price growth was seen in the last three months, as the vote to leave the EU tempered demand. Small falls, of -0.9%, were seen in the London suburbs, reflecting the buyer caution evident in all discretionary prime markets.

Variation by property type

Importantly, these broad regional trends mask significant variations between different property types and performance in all locations is very price band dependent. On average, homes worth under £500,000 have gained 7.0% since the end of 2014, compared to falls of -2.3% for properties worth over £2m.

A more detailed look at house price growth by property size reveals far greater divergence and underscores the post credit crunch buyer preference for urban locations. Prime town and city houses, worth on average £1.3m, have risen an average 2.7% over the past year and 14.1% over the past five years. Large country houses, worth £3.5m or more, are still showing small price falls and values are -7.5% below their level five years ago.

^{Source: Savills prime regional index (* to end Q3 2016)}

Prime urban growth slows

A slowing of price growth is now also becoming a feature of major regional city markets where values have risen most steeply post credit crunch. This has left some locations looking fully valued, particularly as price rises have pushed the average prime house price over the £1m mark and into the higher stamp duty range. Cities such as Oxford, Cambridge, Bristol, Bath and Winchester, which have all in part been driven by equity from London, are now seeing price growth level off.

OUTLOOK

Challenges and opportunities

The introduction of higher stamp duty rates certainly shifted the balance between prime London and the regional markets. Londoners looking to make the move out will be watching the value gap closely to ensure they do not miss the real buying opportunity.

However, the softening of values in the suburban and commuter markets closest to London over the past three months, and slowing of growth in key regional city markets, suggests sellers cannot be complacent.

Buyer sentiment across all markets remains sensitive and these figures are a clear signal to sellers that they must remain realistic on prices. However there remains demand for good prime housing stock, particularly that which is best in class, and appropriately priced.