Prime country house market shows weaker performance

The country house sector showed negative price growth for the second consecutive quarter, with prices falling 0.2% in the three months to the end of March, according to Knight Frank Prime Country House Index.

The annualised rate of price growth has slowed to hit 4.5%, the lowest level since Q1 2006.

For the first time since Q2 2005 manor houses fell in price and finished the quarter -0.4% lower.

The correction in the country cottage market continued for the second quarter running with prices falling in this sector by -0.4%.

Farmhouses defied the negative rates of growth in the other two sectors in Q1 2008 with an above par inflation rate of 0.3% and an annualised growth rate of 5.3%.

Liam Bailey, Knight Frank’s Head of Residential Research comments: “The first quarter of 2008 showed weaker market conditions continue to apply across the prime country house market with negative growth (-0.2%) in the three months to the end of March. The two sectors that performed the weakest were country cottages and manor houses, both of which fell -0.4%. Farmhouses on the other hand managed to buck the negative trend and finished the period with slow, yet still positive growth of 0.3%.

“It is clear that the influence of the correction we first saw in the wider market towards the end of last year is now gently working its way through the country house sector. However, there is no evidence of a serious loss of value.

“The situation has been compounded in recent months by a noticeable under supply of high quality, sensibly priced properties coming to the market. Sellers are taking stock of their options in the face of an uncertain financial environment and are either loathe to enter the market, or once committed are struggling to accept an offer that doesn’t meet their expectations. Buyers also have their parameters, but given the current shortage of credit and limited stock levels are only prepared to pay for properties that meet, if not exceed their expectations.

“The weaker market conditions in 2008 mean that sales volumes are down sharply on 2007, we anticipate that sales across the market will be around 25% lower this year compared to their historic average. This points to the real need for those vendors who need to sell their property in a reasonable time frame making sure that their asking price is realistic and for most properties this means accepting that you will achieve a lower price now than you would have done six months ago.”

Rupert Sweeting, Knight Frank’s Head of Country Department says: “The start of 2008 has seen a market develop where properties with an ‘Achilles heel’ are less easy to sell: however good quality properties are not only attracting interest, but sometimes exceeding asking prices. A gap is therefore developing between buyers’ expectations and vendors ambitions in respect of quality and price.

“In the first quarter of this year across the London and country market, we have already sold half the number of properties over £10m that we sold in the 12 months of 2007. It therefore appears that a two tier market is developing where immaculately presented manor house style properties are not only selling well, but because of their rarity are also attracting a premium over their original asking price.

So sensible pricing, allied with thoughtfully structured marketing plans are finding willing buyers even though the days of substantial price growth are over. It is therefore fair to say that while this correction is in line with our expectations it will reinvigorate the market in the long run.”

Manor Houses:
Although manor houses displayed negative growth in this quarter (-0.4%), compared to a year ago they have grown in value by 6.3%. This means that a property in this sector now averages £3.19m.

Farmhouses:
Properties in this category have grown in value by 5.3% compared to a year ago and even in the tight market conditions witnessed in the first quarter of 2008 grew by 0.3%. As a general guide farmhouses now average around £1.34m.

Country Cottages:
In the first quarter of 2008 country cottages fell to their lowest growth rate in just under three years (Q2 2005) and on an annualised basis displayed 1.9% growth, the slowest since the beginning of 2006. A typical property in this category now averages around £557,900.