_Country View 2020: Key trends that affected the UK prime property market in 2019

In the 2020 edition of Country View, we’ve spoken with Oliver Knight, an associate within the Residential Research team, to find out what the future holds for the prime country property market throughout the year – and beyond. Ollie explains how everything from Brexit to broadband is affecting buyers’ decision to move to the country and that a stabilising political and economic landscape will only strengthen the market further. Read Ollie’s musings on the market below and find more stellar insight from across the business, in this year’s Country View, Knight Frank’s definitive guide to the finest country property from across the UK.

What's happened to values in Prime Markets? 

Prime property prices outside of London at the end of September 2019 were, on average, 1.7% below where they were a year ago in 2018. Prices have been falling on an annual basis for five consecutive quarters, though the process of moderation really began back in 2014 following changes to property taxation. There is, however, no one-size-fits-all answer and the picture varies by region, by price and by type of property. Generally speaking, performance has tended to reflect the extent to which markets have been exposed to a weaker London market, while more expensive properties have also tended to be the most price sensitive.

Politics or policy: what's having the biggest impact? 

When we surveyed our agents towards the end of last year, concerns over Brexit, and the possible economic impact it would have, were regarded as the single biggest constraint on prime housing markets. This was followed by a lack of available stock and then taxation. The impact of higher stamp duty – while still a live issue for many – has receded somewhat, as buyers and sellers alike have increasingly factored it into their pricing, and therefore their overall expectations for cost.

What impact has that had on buyer and seller behaviour?

Prime markets have been driven, in the main, by needs-based movers, such as those moving for schooling, work or family reasons. There were just under 4,000 sales of £1 million-plus property outside of London in the first eight months of 2019, according to the Land Registry. This was 11% lower than at the same point the previous year, but above the level at this point of 2015, before the EU Referendum. This suggests that, despite hesitancy, there is still a healthy pool of motivated buyers active in the market.

Where do you see opportunities? 

Record-low interest rates have helped to underpin market liquidity at all price points and mean that a growing number of buyers are choosing to fix for a longer-period of time. Some 95% of all mortgages issued in 2019 were fixed-rate, with the percentage of five-year or longer fixed-rate mortgages climbing to 49%, which compared to 32% two years ago. Meanwhile, the current weakness of sterling, relative to other currencies, has meant there has been a small, but notable, increase in enquiries from prospective buyers coming from the US and Eurozone.

What's happening in London? 

Prices in the prime central London market are almost 13% below their 2014 peak, though the latest data shows that price falls in the capital have started to moderate and buyer interest is reaching record highs. The flow of buyers from the capital continues to be a key driver in prime country markets and Knight Frank buyer data shows that the number of Londoners who purchased properties valued above £2 million outside of the capital, between January and September 2019, was at its highest level for any corresponding period since 2013, a trend we expect to continue as London market activity picks up.

Are there any long-term trends you are tracking?

Technology improvements including fast, reliable internet have meant that working from home for all or part of the week is a viable option for many, cutting down on both commuting time and travel costs. Those who can be flexible in the way they work are often happy to extend their search outside the magical ‘one-hour train ride to London’ zone, especially if they are only travelling into the capital for one or two days a week. We expect such buyers to be an added driver of the market – particularly in rural prime markets where they can take advantage of the relative price differential as well. Good broadband connectivity will be an increasingly important requirement as a result – 84% of respondents to Knight Frank’s 2019/20 Prime Survey said they would be more likely to move to an area with super-fast broadband. Properties with space for a home office will also appeal to such buyers.

What about the future?

The market will remain price sensitive in the short to medium term. The strongest markets will continue to be well-connected towns and cities, although this differential is expected to narrow as buyers take advantage of the relative value now on offer in more rural markets. A place in the country will always have its attractions. The price differential between London and the countryside, the good schools, the improving rail infrastructure, the availability of superfast broadband are all factors that will appeal to buyers. Overall, we are forecasting average growth of 1% across prime country markets in 2020 and 2% in 2021.