Country Market Comment - Autumn 2021

A lengthy period of uniquely intense activity in the country house market has calmed just enough to see both what has altered and what was, perhaps, never quite what it seemed.

Fuelled by intense demand and squeezed by lockdowns and multiple, multi-level SDLT holiday deadlines, the last 18 months have seen much drama and not a little stress. Demand remains exceptionally strong but the end of higher SDLT relief has taken away some of the bottleneck pressure. The market is less frenetic, making it more attractive for the majority who require both a mortgage and a buyer for their existing home.

This is important: during those ‘race to the Stamp Duty deadline’ days, the competition to buy quickly was so intense, many buyers with finance applications and dependent sales, were outpaced by those with cash. This prompted a spike in non-mortgaged purchases (according to Land Registry data) and the withdrawal of many ‘dependent sale properties’ from the market. This, in turn, exacerbated (if not outright created) a severe shortage of stock from which we are still recovering. Indeed, some owners who want to buy and sell, remain hesitant to enter the fray. Happily for them, the picture is now calmer and becoming progressively more so.

Price pressures have reduced, as have fears that there might be a post-SDLT holiday fall in values, or that interest rates might rise. Prices are still rising, but not as sharply. Interest rates have, incredibly, moved even lower. And, as stock levels return, it really does feel like a market in which there is a little room to breathe, survey the landscape and make a good move. So what has changed?

There has been a switch in the balance of power between buyers and sellers, to the latter. Unlike the mortgaged-vs-cash buyers situation, this is likely to remain so for some time, but the extremes are behind us. Good buyers – especially in the upper price levels – are still prized, if less rare.

For at least a decade, we have reported on the wane in popularity of the kind of home on which our country houses business was largely founded: the rural five bed family house with an acre or two. Idyllic but impractical for households in which all breadwinners commute full time, such homes were passed over in favour of town houses close to an express train station. The ‘partial working from home’ phenomenon has changed this to a startling degree, boosting demand and prices. Just one example of this is a house on which our Northampton office agreed a £525,000 sale, only for it to be withdrawn because the owners couldn’t secure a place to buy. Returning to the market nine months later, a sale was agreed at £576,000 – an annualised increase of 13%.

High demand for rural houses is being perpetuated by the number of major employers now offering permanent contracts under which employees do not have to commute every day, or at peak hours. One result of this is that, for the first time ever, the majority of sales in excess of £1 million have been outside London (52%, Jan - May 2021, Land Reg). WFH, is being baked-in.

Both for those at the seaside and in remote rustic corners, demand for second homes over recent months has exceeded anything seen since extra SDLT on second homes was introduced in 2016. From April to the end of June 2021, 63% of all UK transactions attracted the 3% extra tax, double the normal proportion (buyers still had to pay the 3%, but not the standard tax). High demand persists today, if not at quite such a phenomenal level.

The renaissance in the whole notion of country house ownership and lifestyles has been such that, to see prices grow faster outside London, is no surprise. More surprising, is that it is Wales which has had the highest growth over the last 20 years. But then, Wales started low (2001 average: £54,482); the picture is very different over the last ten years (see graph, page 4). What this really tells us is that, whilst London will always be more expensive and volatile (creating huge trough-to-peak differentials), over time, almost everywhere proves a good investment.

Another trend which runs counter to received wisdom is that our market is typical amongst larger economies. All bar three OECD countries have, it reports, seen house prices rise since the start of the pandemic. Indeed, relative to 2011, UK price rises are below average; 23 countries have seen higher growth including the US and most of the EU (not France, inevitably). Our market is, relatively speaking, normal. In comparison to the preceding 18 months or so, it even feels quite normal at the moment – which makes it a good time to explore your options.