Escape to the country: prime property across the UK

23 December 2019

7 minute read

What differentiates prime properties in the capital from those in other parts of the country? For those considering where to invest, we consider some examples.

Would you be prepared to swap a small terrace house in London for an historic manor house that is three hours’ drive from the capital?

Prime and super-prime properties in all corners of the UK are attracting the attention of wealthy investors, whose view of the UK residential scene is changing.

Edinburgh, Glasgow, Birmingham and Manchester have beaten traditional prime cities such as London and New York in the Knight Frank Global Residential Cities index Q2 2019, based on price changes over the previous 12 months1.

Ed Sugden, a director in the country department at Savills, says the property agent has seen a 7% increase in enquiries about prime properties beyond the M25 this year. “The level of activity has been surprising, both from international buyers, particularly Americans and Chinese, and from those based in London,” he says.

Indeed, it isn’t just international buyers that are fuelling the search for homes outside the capital. The estate agent Hamptons International says 75,000 Londoners bought properties in other parts of the country last year to relocate from the capital, a 4% increase on the previous 12 months2.

The choice on offer for those looking beyond London is appealing. Research by Hamptons International shows that average prices for country properties at the prime end of the market are still 77% below levels in London, despite the steady fall in prime London prices in recent years.

Even so, London remains the top destination for international investors, whose confidence has been boosted by the recent UK general election result. 

A steady fall in prices has also made the capital better value for money. The Savills Prime Central London index for Q3 this year reported that prices were down 20% since the peak in 2014 in sterling terms, and 3% over the last 12 months3.

The extent of price falls suggests that pricing may fully reflect the current market conditions and risks, according to Savills. Syed Raza, Managing Director, Global Banking and Credit Solutions at Barclays Private Bank, says: “As a global financial centre, London remains a sought after location for prime property and in many ways, this slowdown makes it better value than other European cities. However, the opportunities for investment outside of the capital are growing.”

House prices in London

Brexit has dominated the political and economic debate over the last year, clouding the outlook for the UK’s housing market.

House prices in the Midlands and the North of England have continued to rise, while Wales, Scotland and Northern Ireland also remain in positive territory. In fact, Southern England, dominated by London, is the only region that has seen declines over the last 12 months.

Several factors explain the contrasting fortunes of London’s prime and super-prime residential markets relative to the rest of the UK.

The most obvious is simply that prices in London have had further to fall. After rising further and faster than the rest of the UK, London’s market was more vulnerable to a correction. Average asking prices in the capital are currently £618,432, compared to £155,684 in Scotland4.

Likewise, changes in stamp duty five years ago that increased the tax paid on prime and super-prime properties disproportionately hit the London market.

Syed Raza of Barclays Private Bank says: “Following the UK general election result, we saw early signs that confidence could be returning to the prime London market. Whether or not this is sustained, it appears that prices could have bottomed out. While sterling has strengthened in recent months, the relative weakness of the pound still presents a buying opportunity for investors.”

The case for looking outside London

When it comes to capital appreciation, estate agents believe the prospects for residential property both in the capital and outside London are appealing.

Savills forecasts a 20.5% price increase in prime central London over the next five years, compared to 11.5% for prime markets across the rest of the city. Over the same period, it’s predicting a 16.5% rise for the wider South of England, 20.5% from the Midlands and the North, and 18.7% from Scotland.

It’s a similar story on yield. As Knight Frank points out, prime residential assets outside of London offer higher income relative to valuation. Gross yields in prime central London were typically yielding 3%-3.25% at the beginning of autumn 2019, Knight Frank data shows. By contrast, prime assets in cities such as Birmingham, Bristol, Leeds and Manchester all offered, on average, gross yields of 3%-4.5%.

“Local markets outside the capital, like the university and tech hubs of Oxford and Cambridge or those further north in cities such as Birmingham and Manchester, are attractive for investors who want to stretch their wings beyond London,” says Syed Raza, at Barclays Private Bank.

“Consensus forecasts suggest that UK house price inflation will remain modest in the medium term. However, the national picture masks significant local variations and potential opportunities.”

Comparing options in London and the UK as a whole

Buyers should always think carefully before choosing where to buy. For many, the connectivity, culture and vibrancy of London will be unmatched elsewhere in the UK. However, for those buying outside the capital, the payoff is considerably more space.

Terry Gyorffy, Head of Regional Private Banking at Barclays Private Bank, says: “Romantic passion purchases, from English castles to country estates, might be tempting for some buyers, but outside of the main cities, the prime country market remains weaker.”

A lack of supply is supporting prices in the prime country house market, according to Knight Frank, but overall regional prime prices fell 2.3% over the last 12 months. For those considering investing in property outside London, then, the best bet could be booming regional centres, argues Lucian Cook at Savills.

The property agent is receiving a high level of enquiries for prime property in locations such as Bath and Bristol in the South West, York and Manchester in northern England, as well as both Glasgow and Edinburgh in Scotland.

Prime property in Bath and Birmingham

London buyers with around £4m to spend might consider a 2-bedroom first-floor apartment within a new development in Mayfair in central London. It has an open plan reception/kitchen and 1,236 sq. ft of space, along with a 24-hour concierge and residents’ gym and spa. The property is on sale with Savills for £4.1m.

In Bath, 120 miles to the west of London, Savills has a contemporary Italianate style villa for sale in Lansdown, close to the world-famous Royal Crescent. On the market at £3.95m, Somerset Lane is a 4,760 sq. ft modern property built in bath stone with six bedrooms and a large garden.

If buyers are looking for more space in London, the price tag would be much higher. A 7-bedroom grade II-listed terrace house in Knightsbridge, west London, built between 1824 and 1839 with a comparable 6,359 sq. ft of space is on the market with Savills for £16.95m.

Meanwhile, Birmingham has seen a 3.5% annual house price growth over the last 12 months, one of the biggest rises of the 20 cities tracked by the Hometrack Cities Index5.

In Solihull, close to the centre of Birmingham, a Grade II-listed watermill dating back to 1618 is on the market with 3,256 sq. ft of living space and 5 bedrooms is on sale for £2.5m.

Around this price, Savills has a 3-bedroom maisonette with a roof terrace in Knightsbridge featuring 1,980 sq. ft of living space, on the market for £2.65m.

Looking ahead

Lucian Cook at Savills says: “Values in Prime London have been bottoming out over the past year, resulting in a build-up of new buyer registrations over recent months. Both signal that the market is set for a bounce.”

“Our research has found that the average number of new applicants and viewings per office outside London rose to the highest level in five years in the second quarter of 2019.”

At Barclays Private Bank we can help make your property purchase a reality with traditional financing options such as mortgages, or we can help you unlock the power of your assets in order to enter the market as a cash buyer.

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