Has The Country House Price Boom Hit Its Post-Covid Peak?

There are signs that the country house boom has now peaked and buyers are returning to urban life as price growth spikes in city locations.

The post-pandemic race for space has inflated the prices of the most expensive homes outside the capital to its highest level in 11 years. According to Savills estate agents, from June to September, ‘prime regional’ homes rose by 2pc compared with the previous three months. This accelerated annual growth to 8.8pc, the highest rate recorded since September 2010.

The value of £2m-plus country houses in the Cotswolds climbed by 18.5pc year on year, forcing prices 14.4pc higher than their 2007 peak.

As buyers moved outwards contemplating future commuting, growth was most acute in the suburbs of cities, where prices rose by 10.2pc year on year. The ‘staycation’ boom also resulted in houses in coastal hotspots continuing to appreciate in value, recording annual growth of 14.8pc.

In Truro, Cornwall, Norwich in Norfolk and Exeter in Devon, year-on-year house price growth was 16.5pc, 15.8pc and 14.1pc respectively. Yet the data suggest the post-lockdown trend in favour of countryside properties is beginning to subside. Inner city commuter locations recorded the greatest quarterly growth of any area in the UK.

Cities proving popular once again

As workers returned to their offices following the successful rollout of the vaccine and the easing of lockdown restrictions, values increased by 2.4pc in three months.

Frances Clacy, of Savills, believes they are now seeing renewed demand from those who want to be back ‘where the action is’, as well as being closer to transport links and their place of work.

Cities are once more proving to be desirable for wealthy buyers. Oxford, Winchester, Bristol and Glasgow all matched or outperformed growth of prime homes in their surrounding areas. In Oxford, prices leapt 1.3pc in the three months to September, compared with growth of just 0.1pc in the surrounding area.

As ever, it is the ongoing lack of supply that is driving growth despite the abolition of the stamp duty holiday savings. However, almost half of Savills agents surveyed expect the number of available homes to increase over the next three months, a factor that is likely to slow the pace of growth.

Currently, says Andrew Perratt, of Savills, they are in a good place, with the imbalance between supply and demand benefiting them especially in established inner and outer commuter locations such as Weybridge, Sevenoaks and Winchester.

House price growth likely to cool

Meanwhile, UK house price growth slowed in September as economists said the imminent end of the tax break had cooled the market after a period of phenomenal growth. According to Nationwide, the average price rose by just 0.1pc over the month to £248,742, a steep slowdown compared with growth of 2pc in August.

The UK’s largest building society said annual house inflation fell to 10pc, down from 11pc in August. This was down from annual growth of more than 13pc as recently as June, the fastest since the property boom in 2004.

From Nationwide’s house price index, the average is around 13pc higher than before the pandemic began in early 2020. Their data show the ‘start of a period of relatively restrained growth in house prices’ as the stamp duty effect fades, says Gabriella Dickens, a senior UK economist at consultancy Pantheon Macroeconomics.

Dickens adds that alongside the increase in stamp duty, the impact of rising inflation on real disposable incomes is also likely to constrain house price growth further. Yet many economists believe values are likely to be sustained in the coming year by continued low interest rates and restrictions on supply caused by the low level of new housebuilding.

Andrew Wishart, a property economist at consultancy Capital Economics, believes house price growth ‘will cool gradually rather than collapse’.