Prime Country Property Market Review.
We constantly talk about the lack of supply and this year it is worse than ever, not helped by the late Easter and three weeks in a row with bank holidays. Add to that the general uncertainty of the economy and job security and it is not surprising that house owners are not on the move as much as they were a few years ago. It is interesting to note that in 2007 1.5 million houses changed hands in the UK and last year this was down to about 600,000. There is also the ever-increasing cost of moving with stamp duty and the rise in VAT – if you don’t have to move it is cheaper to stay put, however rich you are.
In theory ‘less supply = strong market’ and, as with all general theories, this one is easy to disprove. It holds good if you are talking about a property an hour and a half from London in a good position which is sensibly priced. For example, a house near Charlbury in Oxfordshire went on the market for 1m; there were forty-two viewings and five potential buyers and it eventually sold for over 20% above the guide. A house in Hampshire went on at 5.5m and competitive bidding took it to around 6m. However, if either of these properties had been over-priced at the outset or fifty miles further from London, it would have been a very different story.
We have discussed the ‘best and the rest’ in previous market comments and there is no doubt that there is an ever-widening gap. Although area is an important part of the story, the other vital element is position. Because the vast majority of the population lives in the crowded south and south-east of England, finding a property in a flawless setting, or one that is in an unspoilt village with no issues such as road noise, is difficult. These ‘nuggets of gold’ are the ones to buy, whatever the price range. They are the ones that are often sold before they reach the open market and the ones that we specialise in finding for our clients.
The very top end of the country market, unlike London, is still predominantly ‘English’. It is said that about 60% of properties worth over 10m in classic locations like Eaton Square are now owned by wealthy internationals. England is a comparatively safe place to live, away from conflicts and natural disasters; it is also a tax haven for many from abroad. However this London influx has not been the same in the country. Some international buyers will get as far as Wentworth or St Georges Hill but very few properties further out have been bought by wealthy overseas buyers. We thought a few years ago that because many Russians are keen on shooting, they would buy up the estates, but few have, preferring to stay in or around London and take shooting by the day. In fact, of the last six major estates that have been sold, five were bought by English buyers.
There are a few estates owned by people from overseas: we have recently been advising a client who was buying an estate from a Chinese owner and I can think of another estate similarly owned. Roman Abramovich owns an estate in Sussex and there are one or two others in foreign hands, but the purchase of country properties by international clients has not taken place to the extent that we thought, and could not in any way be compared to the influx of foreign buyers into London. There was recently a feeding frenzy for a property – admittedly not a major sporting estate – with 135 acres in Oxfordshire. It went on the market at 5m and six interested parties bid it up to over 7m – they were all English.
The flow of international buyers into London has another effect on both markets. Twenty to thirty years ago a common pattern was for the English owners of houses in places like Kensington and Chelsea to sell and move to the country. Typically they would swap a house in Palace Gardens for an Old Rectory within an hour and a half of London. This process would almost certainly have produced four separate property transactions. Today an international owner is likely to sell to a similar buyer and move abroad rather than head off to the English countryside – producing only two property sales. This pattern used to create a ripple effect from London to the country which appears to be changing.
Another change is the number of people who want to build their own houses. Twenty years ago new houses were not popular other than in places like St Georges Hill; for the most part buyers wanted period houses. With the rising costs of maintenance and heating, there is a massive growth in buyers wanting to build their own ‘eco houses’.
The demand for agricultural land grows year after year. Having seen the hike in the value of a Grade 3 acre in 2007 from £3,000 to £5,000, today that acre is comfortably worth £7,500 although there are many examples where recent prices have been considerably higher. Recently 1,000 acres near Newbury, with no house or cottage, sold for over £10,000 an acre and 500 acres in Gloucestershire sold for about £9,000 an acre. Not only are farmers constantly trying to buy more land, particularly with the price of wheat now at around £160 – £200 a tonne, there are the tax advantages of investment relief and IHT for those wishing to invest.
A final thought that I have wanted to get off my chest for the last thirty years. It is often said that the three most important elements to look out for when buying a country property are ‘location, location, location’ and there is even a television programme of that name. Location denotes area and although important it is the position of the property within that location that is critical. It is too late to change the television schedules but if you are looking for a house, two elements will do: ‘location and position’.
Jonathan Harington, Haringtons UK, Spring 2011