UK PRIME PROPERTY MARKET REVIEW 2021

With the ‘escape to the country’ trend in full force, 2021 was a vintage year for the country property market

BY CHRIS DRUCE

Senior Analyst, Residential Research

HOW HAS THE COUNTRY MARKET PERFORMED? In 2021, Knight Frank handled the most £2m-plus property sales outside of London that it has ever done.

WHAT IMPACT DID THE STAMP DUTY HOLIDAY HAVE ON THE COUNTRY MARKET? The stamp duty holiday, which offered a maximum saving of £15,000 until 30 June, was arguably a less important driver of activity the further up the value chain you went. However, everyone likes a saving, and £2m-plus exchanges still spiked in March (the original deadline), again in June (the extended deadline) and, to a lesser extent, in September, which marked the final end of the holiday (fig 1).

HOW HAS THE SUPPLY AND DEMAND AFFECTED THE MARKET? Tight supply and high demand kept upwards pressure on prices throughout 2021, with added impetus from the stamp duty holiday. The tax break exacerbated the supply shortage, helping to create even more frenetic conditions that meant many owners – who would have been expected to make the most of a seller’s market – could not find anywhere to purchase and so held back. The number of new prospective buyers (demand) to new instructions (supply) was 12 in October 2021. This compares to eight in October 2020 and nine in October 2019.

Thanks to an explosion of interest in rural living since the pandemic, it is the higher-value end of the country market that has led the way

THE HIGH-VALUE COUNTRY MARKET HAS LED PRIME REGIONAL PERFORMANCE SINCE THE PANDEMIC

UP 0%

£1m to £2m

UP 0%

£2m to £3m

UP 0%

£3m to £4m

UP 0%

£4m to £5m

UP 0%

Over £5m

Prime Country House Index, Q3 2021

HAS THIS AFFECTED THE SPEED OF TRANSACTIONS? With demand high and the shelves clearing through the year, the speed of sale increased in 2021. In September, the time between instruction and an offer being received in the country market was 91 days, down 36% from 143 days in September 2019.

WHICH PART OF THE MARKET HAS LED THE WAY? While it has been a record year generally thanks to an explosion of interest in rural living since the pandemic, it is the higher-value end of the country market that has led the way (see table, above). The groundwork for this strong performance was laid several years ago with a series of tax changes that affected this particular price bracket the most. Coupled with political uncertainty related to issues such as Brexit, price growth for higher-value properties had been relatively flat in the years before the pandemic. This has created the scope for relatively stronger price growth since the pandemic and helped drive the subsequent surge in activity. Country properties valued at more than £5m have recorded the strongest price growth of any price bracket during each quarter since the market reopened in May 2020.

WHAT ABOUT THE FUTURE? We expect supply to increase this spring and price growth to moderate consequently, although demand levels remain so high that the process of normalisation in the country market will be a gradual one throughout 2022.

AND WHAT NEXT FOR THE COUNTRY HOUSE PRICES? In the third quarter of 2021, average prices in the country remained 4% below their last peak in the third quarter of 2007, despite a year of strong growth. This suggests that while the pace of price growth may moderate over the coming 12 months, there remains headroom for further growth in values.

To stay abreast of changes in the market, and to receive up-to-date forecasts, visit knightfrank.co.uk/research

ESCAPE TO THE COUNTRY

A record-breaking year featuring the most monthly transactions ever in June 2021

Fig 1. Source: Country property exchanges at a price of £2m and up. Knight Frank data rebased to 100 from January 2020.


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