Savills : Prime country market ends 2020 on a high while prime central London carries its ‘buy’ rating into 2021

The index shows that a substantial £2 million country house has added an average of £111,000 to its value during 2020 (+5.5%), whereas a flat or small terraced house of similar value in central London has fallen in value by an average of £8,000.

Meanwhile in the rest of the prime London market, where that £2 million would typically secure an additional 1,000 sq ft of accommodation and more garden space, gains have averaged £36,000.

'The unique circumstances of 2020, have led to a surge in market activity at the top end of the housing market,' says Lucian Cook, Savills head of residential research. 'This has supported prices and delivered some unexpected gains, but it hasn't resulted in runaway price growth.'

Data from TwentyCI shows that the number of sales of £1m+ property that were agreed in the 11 months to the end of November was 29% higher than in the same period last year, despite a significant fall in activity during the first national lockdown. Beyond London they have risen by 43%.

'The very top end of the country house market, in particular, has had an extraordinary year - perhaps its best since the 1980s, as buyers sought a lifestyle shift and recognised the relative value on offer,' says Cook.

Overall, prime regional house prices rose by 3.6% in the year, while prime London values rose by an average of just 1.1%. Values in the UK capital's most expensive central locations, where values remain almost 21% below peak, slipped by -0.4% across the year, but stabilised in the final quarter.

'Given the practical implications of Covid-19, the prime central London market has relied on demand from domestic buyers and resident non-doms in 2020. In light of that, it has held up well but it simply hasn't been able to match the performance of the regional markets or indeed the leafier parts of outer prime London.'

	Quarterly growth	Annual growth	Growth since 2014 peak*	Growth since 2007 peak*
Prime central London	+0.1%	-0.4%	-20.8%	+11.1%
Outer prime London	+0.1%	+1.6%	-6.1%	+26.4%
All prime regional	+1.1%	+3.6%	+7.4%	+2.5%

Source: Savills prime indices, Q4 2020 (* Prime London's last peak was in 2014 before stamp duty increases, prime regional markets peaked in 2007 pre global financial crisis)

Other key trends:

In London, price growth of over 4.0% for homes with medium or large gardens, while those with no outside space fell by -0.7% in the past year. A similar trend was seen when comparing houses with flats and homes with five or more bedrooms to those with just one or two. These trends favoured traditional family house markets such as Chiswick, Fulham, Putney and Richmond.

Meanwhile, in prime central London, the strongest markets were Notting Hill, Holland Park and Bayswater, which combine good local amenities, access to green space, walkability and good family housing stock.

Across the prime regional markets, the huge rise in demand for prime village and country locations led to competition for the best in class.

But surprisingly, this has not resulted in real divergence between urban or rural locations. Indeed, while values in prime villages rose an average of 3.2%, prime regional city values increased by a marginally higher 4.1% over the course of the year, suggesting that buyers still value the amenity and connectivity on offer in key regional cities.

The standout performers of 2020 were the ultimate lifestyle relocation and second home choices - the prime coastal and £2 million-plus country house markets.

After many years of underperforming the wider prime regional market, the country house market saw values rise by an average of 5.5%, its strongest performance since 2010, with the South West, the Cotswolds and Scotland the most active markets.

Similarly, demand for prime coastal properties was intense, both from second homes buyers and families seeking a lifestyle relocation. A majority of sales attracted competition, pushing prices up by an average of 5.6%, with Devon, Cornwall, Dorset and Norfolk all proving popular destinations.

Looking forward:

'Recent results from our survey of over 1,300 prospective buyers and sellers suggest that the stamp duty holiday has provided an added motivation to buy and that there are concerns about the ability to purchase before it ends on March 31 next year,' Cook notes.

'But it also indicates that renewed social distancing measures have made buyers more committed to a move over the next 12 months, and that a successful roll out of vaccines will support that further, especially in markets such as central London which have been held back by international travel restrictions.

'As a consequence, while the uncertain economic and political backdrop is likely to mean the prime market remains price sensitive during 2021, we expect activity to remain relatively strong into the spring and less exposed than other parts of the housing market to a subsequent cooling off, with prime central London looking a 'buy' opportunity, particularly for dollar buyers.'