UK sees change in concentration of £1m+ house sales

More than half of £1m+ property purchases are set to take place outside Greater London this year for the first time on record, according to a new study by Private Finance.

The independent mortgage broker’s analysis of Land Registry data for England and Wales shows a 195% rise in residential transactions valued at £1m+ between 2011 and 2016. Total transactions rose by 54% over the same period, meaning the volume of £1m+ purchases grew nearly four times as fast as the overall market.

The trend comes despite cooling activity at the very top of the housing market after successive reforms to Stamp Duty Land tax (SDLT) in December 2014 and April 2016. The continuing rise of house prices across much of the country meant that £1m+ transactions still rose 10% between 2015 and 2016.

Historically, the majority of £1m+ transactions have taken place in Greater London, which enjoyed a 63% share of the higher-end market in 2011. London also recorded by far the biggest growth (7,333) in the annual volume of £1m+ transactions between 2011 and 2016. Surrey ranked second (818) followed by Hertfordshire (676) in third.

However, Private Finance’s analysis shows that this may be about to change, due to the sizeable increase in £1m+ property transactions outside the capital in recent years. From 2015 to 2016, growth of £1m+ purchases in Greater London was outpaced by six other areas: Hertfordshire, Surrey, Essex, Hampshire and Kent.

If this trend continues, 51% of £1m+ property transactions will take place outside Greater London in 2017 for the first time on record.

Table: Biggest areas for growth in the annual volume of £1m+ property purchases

Source: Private Finance analysis of Land Registry data for England and Wales

This may prove to be a conservative forecast, as the latest UK House Price Index (April 2017) shows that house prices are currently rising faster year-on-year in six English regions (East of England, South West, West Midlands, South East, East Midlands and Yorkshire and the Humber) than in London, and also in Scotland.

Across England and Wales, Private Finance’s analysis shows some of the biggest proportional increases in £1m+ property purchases since 2011 have taken place far away from the capital. Between 2011 and 2016, the volume of £1m+ residential transactions grew by 4,800% in South Yorkshire, and by 2,600% in County Durham and Swindon. Meanwhile, the biggest percentage increase in £1m+ transactions from 2015-2016 was in Carmarthenshire (1,200%).

Data from Private Finance for mortgaged purchases in the £1m+ price bracket over the full five-year period between 2011 and 2016 shows the average loan to value (LTV) was 54%, rising to 56% last year. This suggests homebuyers in this part of the market are leveraging substantial amounts of their assets as six-figure deposits.

Between July and December 2016 there were significant falls in average mortgage rates, passing monthly savings to borrowers. Private Finance’s best buy 3-year fixed rate mortgage fell from 1.79% to 1.49%, while the best buy 5-year fixed rate mortgage fell from 1.99% to 1.83%. There were also falls for borrowers looking at fixing their mortgages for longer; Private Finance’s best buy 10-year fixed rate product fell from 2.79% to 2.39%.

Shaun Church, director at Private Finance, said: “Sustained house price growth in London means that even for many highly-paid professionals, a large family home in the capital is now out of reach. With buyers looking further afield as a result, this has contributed to significant growth in the number of million pound-plus transactions in areas like Kent, Essex and the Home Counties, which are all within easy commuting distance of London.

“Buying a million pound-plus property is a significant financial commitment, and with increasing numbers of buyers falling into this category, borrowers may need to look to private banks and brokers to ensure they are able to access appropriate mortgage finance. These tend to offer a more bespoke, flexible service. For example, buyers might leverage unconventional assets like jewellery, fine art or sports cars as a means of obtaining their property. The lender will take into account how liquid the assets are and make a judgement as to whether the borrower could sell an item to repay the loan.

“Private banks are also able to offer interest-only mortgages to such clients, giving them greater choice about when they want to repay chunks of capital, such as if they get an annual bonus. This type of flexibility can prove invaluable in ensuring borrowers can access the most affordable and suitable mortgage finance for them.”