Residential property price growth across all prime regional markets slowed during the final quarter of last year, bringing annual growth to 1.8% as buyer caution continued to impact the market, fresh research shows.
Despite the slowdown, market activity continued to be supported by increasingly realistic seller expectations on price, whilst the impact of stamp duty on higher value homes saw those lower value locations further away from London perform strongest, indicating buyers are now more focused on finding value and willing to move further afield to find it.
Values across all regions increased slightly by 0.1% during the quarter, whilst prime London continued to remain in negative territory, according to the study by Savills.
As prices in London become more aligned with buyer expectation, the market has become more fluid, unlocking sales in the regions where willing buyers looking to move from the capital are now able to transact.
With lower value markets further from London performing better than their closer counterparts, the strongest annual growth was recorded in the outer commute – 30-60 minutes travel from London – where prices rose by an average of 3.4%.
Lucian Cook, Savills UK head of residential research, said: “Pre referendum uncertainty, coupled with the rise in stamp duty from April last year, has affected sentiment in the prime regional house market, and it’s clear now the ripple of house price growth previously seen has been tempered.
“Buyers are still seeking value away from the capital, but the right price now often comes before the right location.
Prime properties in cities such as Bristol and Cambridge have proved particularly popular, driving prices up by 3.8% last year, compared to just 0.9% for rural locations. However, the rate of growth appears to be slowing as equity flowing from London has left them looking fully valued.
Smaller, lower value properties outperformed the rest of the market, with those priced less than £500,000 remaining the most robust and showing growth up 0.5% since September. In contrast, homes priced £2m-plus saw values fall by -0.6%, reflecting the ongoing impact of stamp duty increases.
Cook added: “Buyer sentiment across the prime regional market is expected to remain sensitive over the coming year as the exit process to leaving the EU becomes clearer and more established.
“As a result, we expect little or marginal growth. There is growing recognition that the value gap between London and the regions is as wide as it is going to be, which in turn is likely to boost buyer commitment and demand will remain strong for realistically priced homes particularly with access to good transport links and schools.”