Price falls are slowing in the UK’s prime property market, but the north and the Midlands are set to outperform over the next five years.
The latest prime UK residential markets report from Savills shows how improving confidence in the prime property space has seen price falls begin to ease, with prime regional house prices down just -0.8% on Q3 – compared with the previous quarterly fall of -1.5%.
In prime central London (PCL), there was just a -0.2% dip in values in the final three months of the year, and annual falls of an average of just -0.8%. This puts the PCL market ahead of the rest of the UK prime property sector, which is believed to be largely down to the dominance of cash sales in the area.
More than three quarters of PCL sales in 2023 were made by cash buyers, with Frances McDonald, director of Savills residential research, pointing out that “the prime markets are less reliant on borrowing than the mainstream, and more responsive to sentiment”.
McDonald adds: “These results point to a market that has all but levelled out, something that could happen in the first few months of 2024, ahead of their mainstream equivalents, unless we see a major shift in policy.”
North and Midlands prime property will outperform
Compared to the UK regions on average, the prime property market in the north and the Midlands lagged behind in terms of pricing resilience in the final part of the year, according to Savills’ research.
While the average regional prime property (excluding London) saw quarterly price falls of -0.8% in Q4, the north and Midlands area suffered a -1.2% drop. On an annual basis, though, the two regions saw a slightly more modest price fall of -4.2%, compared with the -4.8% average.
However, when it comes to the five-year forecast, Savills expects the north and Midlands prime property markets to excel compared to all other parts of the country, including the regional markets and prime central London.
It predicts growth of 21.5% in these two regions between now and 2028, compared with a prime regional average growth of 18.6%. In prime central London, Savills expects five-year growth of 18.7%.
In the short-term, the expectation is that much of the UK’s prime property market will perform in a similar way to 2023, with debt dependence dictating market performance. Therefore, prime central London’s figures should see some improvement, while more heavily mortgaged markets elsewhere may take longer to recover.
What about the mainstream market?
The prime property market often reacts in a different way to the mainstream markets in light of interest rates, mortgage rates and issues such as the cost of living crisis, as those who are active in this space are less affected by these issues.
In terms of mainstream property market performance, the north and the Midlands are still expected to be particularly strong regions over the coming years compared with the UK average, according to Savills’ five-year outlook.
On average, UK property prices are expected to climb by a cumulative 17.9% between now and 2028, returning to growth after more price falls in the 12 months ahead. However, looking at the individual regions, a number of places across the country are expected to show a much greater level of resilience.
Top of the pack is the north east, where property prices in mainstream markets are expected to increase by 21.4%, which is the same as in Wales. The north west, Scotland and Yorkshire and the Humber are also forecast to see above-average price rises of 20.2% over the next five years.
However, the mainstream market in London is set to see the slowest price rises in the country, with just 13.9% expected to be added to the value of the average property by 2028. Of course, within this there will be wide variations between the different parts of the city, with some expected to significantly outperform this figure.
