Overseas buyers fuel country house price growth

Prices of country houses grew by an average of 3.3% in the second quarter of the year leading to an annualised price growth of 11.6% for manor houses and 10.4% for all country houses, according to the latest Knight Frank Prime Country House Index.

Manor houses continue to be the strongest performing country house sub sector, with average growth of 4.1% in the quarter.

The average price of farmhouses increased by 3.0%, while cottages increased by 2.8%.

The South West was once again the best performing region, with price growth in the second quarter of 2007 at 5.3%.

Price growth has been led by the most expensive price brackets: £4 million+ properties rose by 21.2% in a year compared to only 8.5% for those priced less than £1 million.

43% of £5 million properties in the South East are now bought by overseas buyers, the highest level on record and well above the 32% figure in June 2006.

Knight Frank’s Head of Residential Research, Liam Bailey, comments: 2007 is proving to be a strong year for the country house market. Manor houses proved to be the strongest sub sector yet again, with prices growing by 4.1% bringing their annualised price growth to 11.6%, well above the 8.9% recorded for the mainstream national market. The current average price of a Manor house has now broken the £3,100,000 barrier.

Payment of City bonuses together with an increasing international presence in the country house market has aided price growth. Cottages have increased price by 2.8% to average a little over £562,000 while the price of farmhouses increased by 3.0% to an average price of just over £1,311,000.

Prices of manor houses, farmhouses and country cottages have risen by £3,842, £10,483 and £27,117 per month on average since June last year.

The South West region was the best performing region in the UK with property prices increasing by an average of 5.3% in the first quarter of the year.

Market indicators

We saw a very strong 2006 and early 2007 in the country house market – with high price growth and strengthening sales volumes. On a year on year basis we saw a slowing in market indicators from March this year. For example the numbers of applicants per available property fell sharply by 20% over this period.

The upshot of this change was effectively a smaller pool of demand compared to a rising pool of supply over time leading to a tightening in the market over the summer period.

However in June and July the volume of property sales agreed rose significantly – up 32% on a year on year basis – meaning that the supply / demand balance has shifted. We believe the top end of the market will see stronger growth over the next six months.

The indicators from London are positive at the top end (above £3 million) with rapid turnover, low supply and high demand. The mid prime market (£1-3 million) is more subdued. This matches our experience that it is the top end which has again experienced the largest market imbalance – especially in the south of England, with overseas purchasers taking a larger share of the market.

In the year to June 2007, overseas buyers accounted for 14% of all prime country house purchases. That figure rises to 43% in the South East of England above £5 million. At this level the share of the super-prime market is taken by: 29% European, 9% Russian, 1% US, 2% Asian, 2% Middle Eastern, 1% Rest of the World.

The country house market

Knight Frank tracks the performance of three country house property categories:

Manor house prices rose by 11.6% in the year to June, with the average example increasing in price from £2,801,000 to £3,126,000 over the 12 month period (an increase of £325,000 A typical manor house comprises a large property standing in its own, usually extensive, grounds with a private drive.

One such property currently on the market is The Old Forge Edgeworth, a beautifully presented six bedroom house set in the heart of the Cotswolds. The house is surrounded by stunning gardens within which is a tennis court. There is also current planning permission granted for the Coach House, to provide a staff cottage, garage, storage area and potential office space. Guide price of £3million.

Farmhouses rose by 10.6% in the year to March, with the average example increasing in price from £1,185,000 to £1,311,000 over the 12 month period (an increase of £126,000). A typical farmhouse has between 5 and 6 bedrooms, several acres of land including garden, paddock and barns.

An example would be Old Biggin Farm, a four bedroom farmhouse near Holmfirth in West Yorkshire, which is currently on the market for £1.3million. The property has extensive lawned gardens that are elevated to take full advantage of the panoramic westerly views and include an arched sun colonnade, terracing and a feature decking area with hot tub.

Country cottage prices were 8.9% higher in March compared to 12 months earlier, with the average example increasing in price from £516,000 to £562,000 over the 12 month period (an increase of £46,000) The typical cottage has up to one acre of land, is detached, and has three bedrooms.

Little Northdown Cottage is one example currently on the market for £550,000. The property is an attractive three bedroom stone cottage that has extensive outbuildings with enormous potential.