A report by Lloyds Bank shows a very interesting insight into the top end of the UK property market where properties are valued at in excess of £1 million. Despite the doom and gloom portrayed by many in the UK, in light of the Brexit vote, there has been a recovery in the sale numbers of houses valued over £1 million. During the first six months of 2016 the number of property sales in excess of £1 million increase by 12%. However, all is not as it seems!
Revival of top end UK property market
There were 6684 homes sold in the first six months of 2016 with a value of £1 million and above. This is a significant increase on the 5946 homes in the first six months of 2015 and perhaps more surprising when you bear in mind this covers the run-up to the Brexit vote. So, despite many trying to portray a doom and gloom scenario for the UK property market it does seem as though investors are willing to look longer term and discount what will be a volatile period for the UK.
Average selling prices
It is interesting to see that while the number of £1 million plus home sales has increased over the last six months the average selling price has fallen. In the first half of 2016 homes worth over £1 million was sold at an average £1,727,327. When you consider the average sale price for the first six months of 2014 was £1,862,578 this may well be suggesting a slowdown in top-level property price increases?
Many experts have been suggesting for some time that the top end of the UK property market was in theory moving way beyond what many see as “fair value”. These figures would indicate a more cautious approach to properties at the top end but when you bear in mind the volatile economy, the UK and the worldwide, is this really so unexpected?
Blowing the froth off the market
Over the last 20 or 30 years the UK property market has performed admirably with significant growth in interest in properties worth £1 million and above. As a consequence many believe that the reduction in average selling price over the last two years is nothing but “blowing froth off the market” after years of outperformance. This is a genuine argument when you bear in mind the increase in the risk factor of late and the amount of investors who have decided to sit on the sidelines until Brexit is over.
It would take a brave person to call the top of the higher echelons of the UK property market but whether we are in for a short term breather remains to be seen. There is nothing wrong with short-term consolidation, especially in the current volatile environment, but time and time again investors have returned to the UK property market.
Conclusion
While we have seen a recent increase in the number of sales of properties valued in excess of £1 million the average selling price has fallen over the last two years. In reality this is just a reflection of less buoyant market conditions, concerns about the economy and the ongoing confusion over Brexit. The increase in sales numbers shows there is underlying demand but perhaps people are being a little more selective about the price they are willing to pay?