Posh properties to see prices drop 6.5% this year says Savills
Expensive homes are expected to fall in value by 6.5 percent this year, according to a leading real estate agent.
Savills predicted the drop, saying buyers are “more realistic” after two years of record growth in the housing market.
However, it added that these homes – worth at least £2million – are “more robust” than other parts of the market due to a higher share of cash buyers and a lack of supply.
These cash buyers are less affected by rising interest rates and rising mortgage payments — meaning values will regain lost ground over the next five years, rising 9.9 percent, according to Savills.
But that forecast also represents a much slower growth rate for house prices than in recent years, with annual gains averaging less than 2 percent.
Estate agent Savills has predicted how values in the prime housing market will change over the next five years
The broker said prime homes fell in price by 0.4 percent in the last three months of 2022.
The findings came from its own research, based on “experience and historical evidence,” defining the major market as the top 5 to 10 percent of the market by value.
At the same time, the number of potential buyers registering an interest was 47 percent higher than the same period in 2019, it said.
Andrew Perratt, from Savills, said: ‘While frenzied activity has eased during the pandemic, demand is still high for prime properties in the most desirable locations.
Indeed, county houses in the Cotswolds and East of England continued to see modest increases in house prices in the quarter.
Savills went on to explain that while the supply-demand imbalance persists in the high-priced regional market, economic challenges have weighed on buyers’ purchasing power.
This will dampen demand in this part of the housing market in 2023, it said.
Country houses in the east of England have seen a ‘modest rise in house prices’, Savills says (Photo: Seven-bed house in Norwich’s Swannington is being sold by Savills for £2.1million)
Mr Perratt explained: ‘We forecast that prices in the main regional market will be an average of 6.5 per cent lower by the end of the year, keeping values where they were in mid-2021.
“The higher cost of borrowing is likely to have a stronger impact on those markets that tend to take on more debt. For example, average prices in London’s suburban and commuter areas are expected to fall by 8% by the end of 2023.
But for now, the amount of premium inventory available to buy remains limited, with nearly half of Savills agents reporting a drop in inventory over the past three months, which will cushion short-term price drops.
“And our recent client survey showed that there is still a strong will to move over the next 24 months, which will help support a mid-term price recovery once we move past a period of high interest rates.”
Country houses in the Cotwolds have also seen a rise in value, agents say (Photo: Five-bed house in Upton Cheyney in the Cotwolds, sold by Carter Jonas for £2.5 million)
Elsewhere, Halifax revealed that the average price of a typical British home is £281,684, which is only marginally lower than a month earlier, but £12,308 down from August’s peak of £293,992.
Prime Purchase’s James Shaw said: ‘In key regional markets, we see a stratified market where the ultra-rich are driven by the home and getting their desires, rather than worrying about money.
These prospects are not affected by rising interest rates. If they choose to borrow, it’s because it makes commercial sense, rather than because it’s necessary. Lack of stock means that if a property they like pops up they will inevitably grab it.
‘We see that buyers are becoming more and more cautious and paying closer attention to the price. But due to a lack of stock, there are still some optimistic valuations around.
“This year we expect sellers to try to reach the moon in terms of price. If they are really motivated to sell and have a reason to do so, they will probably have to adjust their aspirations.’