The UK rural market has seen astonishing growth in the wake of the outbreak, when a sudden "battle for space" forced people to leave London and big cities in search of quiet country homes. But analysts predict that house price growth will slow before the end of the year. Should buyers who bought rural homes during the pandemic sell as soon as possible or keep holding? It all depends on the type of property they are buying and the specific use.
According to Chris Druce, senior research analyst at Knight Frank, official government figures show that overall UK dwelling prices have risen by around 20 per cent since the Covid-19 pandemic. Rural properties, especially high-end homes, are appreciating faster than at any time before the 2008 global recession.
“The rural market has recorded four consecutive quarters of double-digit growth,” Drews said. Taking the most recent statistical cycle as an example, house prices rose by 11.3 per cent in the 12 months to March this year, a slight increase from the previous cycle. rise."
The surge in prices during the pandemic was largely driven by a shortage of listings, especially in the high-end and ultra-premium markets. He added, “The rural market is currently keeping pace with the mainstream market, with very strong deal activity and basically still in short supply.
Analysts predict that overall price growth in the UK property market will slow by the end of the year as benchmark and mortgage rates rise, as well as the impact of rising living costs. Digits down to single digits. But with many people still enjoying the convenience of working from home policies and the hybrid working model offering commuters great flexibility, they expect the rural market to continue its strength.
Analysts from Knight Frank International predict that in the five years to 2026, the overall residential price in the UK will increase by a cumulative 13.6%, of which the growth rate may drop to 1% in 2023, before stabilizing and rebounding again. Prices for high-end country properties are expected to rise by 17% over the period.
"This is an unprecedented time, but we still expect the rural market to grow by around 5.5% this year," Drews said. "From the 2008 global financial crisis to the long before the outbreak, there were only three rural markets. Quarterly price growth topped 5%, which is quite optimistic in comparison.” This is partly due to the long-term lagging growth of the UK country housing market before the outbreak. Since 2007, house prices in London have risen by 16.5%, during which time the overall UK residential price has soared by 48%.
He explained: “It was only in March this year that the total value of the country housing market exceeded its pre-GFC peak by one percentage point. We think there is still significant upside in this part of the market. If you compare central London since 2007 The market performance of the prime locations in the district, and then referring to the general uptrend of the overall UK market, we will find that the performance of the rural market is really underperforming.”
Simon Leadbetter, global chief executive of real estate agency Fine & Country, said the lower end of the market was slowing faster than the higher end, despite the same headwinds. He said: "From the data I've got, for properties of £1m ($1.23m) and above, especially truly unique houses, country houses and estates, and distinctive suburban properties, sales don't There is no significant slowdown. I think it is because of this uniqueness that there will always be buyers.” He added, “The UK market has grown rapidly, so it is inevitable that the pace will slow down, but we We believe high-end and ultra-high-end properties will be affected most limitedly.”
Analysts said persistent inventory shortages kept demand high in rural markets and supported prices. According to a Savills survey published in April this year, the undersupply was most pronounced at the top end of the market, with purchases of homes valued between £1m and £2m and buyers of £2m and above. Among households, 71% and 68%, respectively, said a lack of supply has seriously hindered their home-buying plans, compared with 63% of the overall market.
Lindsay Cuthill, head of rural properties at Savills, said: "The lack of stock is driven by a surge in demand. Last year there were significantly more transactions worth over £1m than in previous years. This suggests that the root cause of the shortage is The relative ratio of the number of buyers to the listings for sale is seriously out of balance, not the number of listings themselves.” He expects the price growth in the high-end rural market to remain in double digits for the next year or two. He said: "Our analysis believes that this part of the market is relatively vulnerable to the adverse factors that cause the overall market to decline. The new crown epidemic has fundamentally changed the way of life for many people and stimulated their continued interest in rural properties."
Leadbetter noted that this demand is unlikely to subside anytime soon. He said: “There is no market in the UK that is seeing the strongest growth right now than the areas around London. I think it comes back to the broader issue of not building enough houses, especially in Areas of Outstanding Natural Beauty, rural areas or Green belt, housing construction cannot meet strong buyer demand.”
With offices gradually reopening, many buyers who bought country properties during the pandemic are still planning to stay there, even if it means buying another flat in London for two or three nights a week.
"The country market still has considerable growth potential, so there's not going to be a big pullback right now," Drews said. "We're not going to see a massive exodus of people from the country back to London, and the reality may be a little more nuanced."
For those buying rural properties during the pandemic, should they sell as soon as possible or keep holding? It may depend on the type of property they are buying and the specific use. The slowdown in price growth for high-end properties may be delayed as high-net-worth buyers are more resilient to rising mortgage rates and the cost of living.
Savills research shows that up to 30 per cent of homebuyers in the top end of the market are opting for all-cash payments, but they are already starting to feel the financial strain as buyers at the lower end of the market who bear the brunt. A third of first-home buyers said the recent rise in interest rates had reduced their home buying budget, with 74% of buyers looking to buy a home under £500,000 claiming they had to reduce their budget due to the rising cost of living.
Analysts believe that holding high-end rural properties is a solid investment. Cuthill said: "If you've spent £2m on a house, it's probably going to appreciate to at least £2.2m or £2.3m in two or three years' time." He said: "If you want a deeper answer, maybe you need to be specific analyze."
The high costs associated with buying and selling properties may offset the gains, Cuthill said. Also, maintenance costs can be daunting for homeowners who don't plan to use their country home regularly. "Owning a country house is obviously more of a responsibility than owning a home of the same value in London, because you need to put more human, material and financial resources into everything like the roof, the walls and the courtyard," he said.
He added, “If you buy a nice cottage in a village with a small garden, it probably doesn’t make much difference whether you sell it or keep it. But for a large property that needs careful maintenance, Then there are more factors to consider.” For owners of high-end properties, short-term rentals are an effective way to cover costs and enjoy future benefits.
Leadbetter said: “Currently, many businesses have relocation plans, so executives will decide where to dispose of and look for quality rural properties. Considering living with family, they do not want to be placed in hotels, so They would rather pay between £20,000 and £50,000 a month to rent, while they carefully consider whether they plan to live in the area."
Geography also plays a role in future return on investment. In scenic areas such as Cornwall, Wales and North West England, buyers are still making offers well above asking prices in a bid to compete for listings due to high demand. In other parts of the country, price growth may depend more on property type.
Oliver Custance Baker, head of rural properties at estate agency Strutt & Parker, said: “In the ultra-premium market, it is more likely that buyers tend to value the home rather than the location. Small, but very active. When a once-in-a-lifetime mega-mansion hits the market, it’s bound to generate interest.”
Overall, analysts say, if owners can afford the maintenance costs of rural properties, future value-added benefits can be expected. "Long-term, there's still a lot of growth in the market," Drews said. "If you own a home, unless you have to sell it, I suggest you keep it," Leadbetter said. The momentum is going strong."