As a momentous year for UK politics draws to a close, the prime regional housing markets continue the slow march to recovery. Suburban and northern markets have proved the most resilient, while second home hotspots have remained somewhat more price sensitive.
Nick Maud, Director, Residential Research
The cautious mentality that typified much of 2024, in advance of July’s general election and October’s Labour Budget, persisted into the tail-end of the year, as prime regional housing markets continued to adjust to the new fiscal environment, as well as the ongoing wind-down of the post-pandemic ‘race for space’. Consequently, we are yet to see a return to price growth that was last observed before the Truss mini-budget of late 2022.
This said, prices fell only marginally by -0.2% in the final quarter of the year, meaning the annual price adjustment slowed to -1.0% in 2024 as a whole.
This represents a notable improvement on 2023, when prices fell by -4.6%. These adjustments should also be viewed in the context of a 9.6% net increase on pre-pandemic values.
Prices for country houses followed a similar trajectory, falling by -0.5% quarterly and by -1.4% annually as Rachel Reeves’ announcement of restricted agricultural and business property relief for inheritance tax added a degree of caution to a discretionary market.
On a quarterly basis, the value of prime properties in Suburban and Inner Commuter regions were the most resilient in Q4, experiencing 0.3% and -0.1% growth respectively. These areas include locations within the orbit of the capital, such as Cobham (0.6%), Weybridge (0.6%) and Tunbridge Wells (+2.8%), which were particularly strong performers in the quarter.
They are also popular with upsizers and relocators, who are continuing to benefit from the latest base rate cuts and accessible mortgage deals. Over the year, the Midlands/North (+0.8%) and Scotland (+0.0%) fared the strongest, while the Wider South region saw the greatest decline at -2.5%.
This may in part be driven by the continued falls observed across coastal regions, which are classic enclaves of second home ownership and are still experiencing price correction, following a short-lived boom in activity post-pandemic. However, the result of this is also that properties in such locations are now beginning to look like a compelling proposition to a certain class of buyer, which finds the accompanying lifestyle appealing.
Activity levels at £1 million and above in Q4, measured by agreed sales net of fall throughs, have been 10% above those observed over the same period in 2023, according to data from TwentyCi. Sales activity has also been consistently higher than the previous year on an annual basis in the second half of 2024. This was most notable in July (30%) following the general election and in October (46%) in anticipation of the Budget, as prime buyers sought to get ahead of any challenging policy announcements. Following a more muted November (6% annually), sales resurged over December (28% annually), as the market started to adjust to the new fiscal environment.
Price growth across prime regional markets is expected to be driven primarily by continued base rate cuts in 2025, which will in turn lead to lower mortgage costs and a general improvement in sentiment. While January’s application of VAT to school fees may act as a drag on some household budgets, there may also be increased demand in the short term from those relocating from larger cities, including the capital, to regional locations with a mix of high-achieving independent and state-funded schools. For the coming year, we expect growth of 2.0% for all prime regions and 18.2% over the next 5 years.
In comparison, our UK mainstream forecasts are projecting 4.0% growth in 2025 and 23.4% growth over the next 5 years. This difference is in part due to the additional SDLT surcharge for second home purchases announced in the Budget, which may temper the route of the recovery for certain prime markets, where second homes are more prevalent. Equally, the tightening of agricultural and business property relief for inheritance tax may also temper budgets from the wealthiest private buyers.
< View our latest Q4 2024 updates here.
For more information, please contact your nearest regional office or arrange a market appraisal with one of our local experts.