Top-end regional activity remained strong throughout the second quarter, despite some caution ahead of July’s general election. But lower mortgage costs and improved sentiment expected to bring a stronger second half of the year.
Frances McDonald, Director, Residential Research
Despite some caution in the run up to July’s general election, prices across the prime regional markets of the UK have held relatively steady.
Average prime values fell marginally by -0.4% in the second quarter, leaving them -2.7% lower than a year ago. That said, price falls have continually improved on an annual basis since September 2023, when values were down -5.2%.
Some uncertainty surrounding the general election, in particular Labour’s plans to introduce VAT on private school fees, coupled with the prospect of further interest rate cuts saw a slowing in demand across some prime regional markets during the second quarter.
But with the expectation of Labour’s majority win (given what we knew about voting intentions), a change in government was already largely priced in to many parts of the prime market. And with the shorter than expected run up to the general election, there is more opportunity for growing buyer demand throughout the rest of the summer and into the autumn.
Top end regional activity remains up on last year but realistic pricing increasingly important as stock levels rise
Agreed sales (net of fall throughs) above £1 million in the regional markets were up 11% on an annual basis in Q2, having remained 3% higher throughout June, according to TwentyCi.
Some sellers decided to adopt a wait-and-see approach in the month preceding the general election, as new instructions above this price point were down -9% compared to June last year.
But overall during the second quarter, £1 million+ new listings were 13% higher than the same period last year and almost all (92%) of Savills regional agents reported an increase in stock levels. This is likely to continue as 73% of these agents also expect supply to increase in the next three months.
This suggests that while demand remains, buyers now have more choice and so realistic pricing will be increasingly important going forward.
Properties in urban areas continued to outperform neighbouring rural markets over the second quarter of 2024, as buyers prioritised proximity to local amenities and good connectivity to commuting routes.
Prime properties in city and town locations saw prices fall by an average of -1.7% and -2.2%, respectively over the past year, while in village and rural locations, values fell by -2.9% and -3.2%.
Prime city and town markets also tend to attract more demand from needs-based, debt-reliant buyers, such as families and young professionals, and as mortgage costs have improved, these buyers are becoming more active in the market.
Throughout the remainder of this year we are expecting to see an improvement in sentiment now that Labour have formed a new government, although details around specific policies and proposals still remain unknown.
At the same time, several lenders have started to lower their mortgage rates in anticipation of a fall in Bank base rate in August. This will support renewed demand and we expect a stronger second half of the year. Buyers’ source of funding will continue to impact market performance and as rates continually improve, those who are more reliant on debt will be encouraged back to the market.
More specifically, Labour’s plans to introduce VAT on private school fees could see more demand filtering into the state and grammar school systems which may increase the house price premiums we know are already evident around high performing state schools.
Any changes to non-dom status could also impact prime regional markets that are more reliant on international demand, such as Surrey’s private estates.
< View our latest Q2 2024 updates here.
For more information, please contact your nearest regional office or arrange a market appraisal with one of our local experts.