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London life back on top as country homes drop in price

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Current allocations to illiquid assets for those investors surveyed were typically between 11 per cent and 25 per cent, with 60 per cent of respondents falling into this range.
Current allocations to illiquid assets for those investors surveyed were typically between 11 per cent and 25 per cent, with 60 per cent of respondents falling into this range.

Soaring interest rates have softened the prices of luxury homes outside of London, according to new data, in a signal that the ‘move to the country’ trend fuelled by the pandemic is showing signs of slowing. 

The average value of luxury homes across UK markets outside of London – broadly the top five per cent to 10 per cent of the market by value – slipped 1.5 per cent in the second quarter as sky high interest rates continued to rattle the mortgage marker, according to analysis by estate agent Savills. 

The figure marks a 3.5 per cent drop year on year, though it is still 12.1 per cent up on the first lockdown in March 2020.

Over the past year, high value housing markets in regional cities saw price falls of 1.4 per cent, while village and rural house prices fell by 3.7 per cent and 3.9 per cent respectively. 

It comes after a boom in this market during the Covid-19 pandemic, when many workers left the city in search of greater space whilst the country was trapped in various lockdowns. 

“With increasing pressure on buyers’ budgets, committed sellers need to price in a way that reflects the prevailing macroeconomic conditions to achieve a sale,” said Frances McDonald, director in the Savills residential research team.

“But the work-life balance has had something of a reset over the past six months, which has helped  underpin values in prime city locations across the country which are now marginally outperforming.  Ease of access to transport, work and amenities are once again priorities that trump lifestyle considerations for some buyers.”

It comes as the housing market faces a tumultuous period. 

Prospective buyers have been burned with red hot interest rates following the Bank of England’s decision to raise interest rates to five per cent last month in a bid to tame inflation. 

In early spring, the housing market was showing signs of improvement, with figures from the Bank of England showing the number of mortgage approvals was on a steady rise. 

However, over the last four weeks since the hike, Zoopla recorded a 14 per cent fall in buyers in the market compared to the same period a year ago.

According to Moneyfacts, the average rate for a five-year fixed term mortgage now sits at 5.83 per cent, up from 5.17 per cent since the start of June.