Will houses in the South keep their value?

Published 10th Mar 2008

Follow this guide to places more likely to weather storms in the market
Wide angle view of traditional Victorian terraced houses in a Kensington suburb against a blue sky.
Paula Hawkins

Even the most staunch optimists will agree that 2008 is shaping up to be a difficult year for the housing market. Although some areas seem destined to suffer significant price falls, others appear likely to emerge relatively unscathed even if the worst happens.

But what is the position in the South? Prime Central London has proved relatively immune to problems within the wider property market: capital growth has been remarkably consistent, with average prices rising in all but one of the past 25 years. And, despite fears over changes to the resident non-domicile tax rules that will affect wealthy foreigners, as well as problems in the City, prime London postcodes are still performing surprisingly well. An analysis of Land Registry figures by London Central Portfolio, the property investment company, indicates that house prices, as opposed to flat prices, in Kensington, Chelsea and Westminster rose by 50 per cent in the last quarter of 2007, while flats and maisonettes grew by 16 per cent.

“The maturity of an area is a key factor, so the most established postcodes will be the best performing and the most robust,” says Anne Currell, of Currell Residential, who believes that anywhere in London W1 is likely to be a fairly safe bet. The more exclusive the address, the safer you are likely to be, agents say.

“Belgravia has been perceived as the prime area of Central London property for almost two centuries,” says Christopher Ames, the head of sales at the estate agent Henry & James. “The area is populated by a wide mixture of wealthy internationals. Some of these work in the City, but others have their third or fourth homes here to use for a few months of the year. Hence the area seems to survive economic blips and downturns that might affect outlying areas of London.”

There are likely to be pockets of resistance outside the most established areas, too. “Traditionally any postcode south of the river used to be unappealing, but now Shad Thames [between Tower Bridge and Bermondsey] is regarded as a fashionable, affluent place to live, particularly with City money and media types,” says James Hyman, of Cluttons Tower Bridge. “The regeneration of the South Bank, coupled with a limited amount of supply and no further major developments planned, has led to an increase in popularity.” Demand is strong, with about 35,000 white-collar employees working within five minutes' walk of Shad Thames, and a further 6,000 being relocated to the area by PricewaterhouseCoopers.

Opinion is split on areas such as Clapham Common and Wandsworth, which are very popular with families. Russell Hunt, of Property Hunt, believes that houses in these areas will hold their value. “These areas have large Victorian houses, green open spaces, highly desirable schools and their high streets are being regenerated,” he says. “Growth in these areas should continue to be stable.” But others believe that the spectacular house price growth here in recent years leaves them vulnerable. “If anywhere is going to see a decline in prices, it is areas like Clapham and Battersea where they have seen strong growth,” Hyman says.

Outside London, there are a number of factors which mark out an area as more resilient than its neighbours. “Areas tend to hold their value in a less buoyant market if they have the following: good communications, good schools and good amenities,” says Russell Hill, of the Winchester branch of Strutt & Parker, who cites Winchester and Guildford as examples of places where prices tend to hold their value. Guildford has good schools and, crucially, proximity to London.

“Guildford is a strong commuter zone with a market which is fed by London but also supported by strong local and international demand,” says Lucian Cook, a director of Savills research. “While applicant numbers fell heavily in some other areas, those in Guildford in November, December and January remained at just under 97 per cent of the level for the same three months a year earlier.”

In some towns and cities, there are small pockets of housing that are much more likely to withstand a market downturn than others. Take Oxford: “Central and north Oxford are a nightmare to get in and out of, but the Parktown area, which is close to the great Oxford schools, has eight or ten streets with very nice Victorian villas which sell for prices comparable to London,” says Nick Ashe, the director of Property Vision, the property search company. “Everyone wants to be within this one small area, and properties don't come up for sale very often.”

The Vale of Pewsey in Wiltshire is another area with great schools. “It includes the trophy town of Marlborough and continues to remain popular, given the quality of the surrounding countryside and transport links via mainline rail stations and the M4,” Cook says.

Areas of the country that are regarded as great holiday or weekend destinations also tend to hold their value well, even if demand for second homes generally seems to be slowing. “Often the most expensive properties that we get involved in are used just for weekends and holidays,” Ashe says. “In places like the Cotswolds, if a really good house comes up you won't see it sell for any less than it would have done last year. People have often been looking for properties for months, or even years, and they are unlikely to be put off now.”

Farther west, City types continue to snap up holiday homes in the most desirable villages. “Dittisham, in south Devon, is great for sailing and has good train links: there are plenty of successful City people looking for holiday and weekend places out there,” Ashe says. “St Mawes in Cornwall is also very popular.”

Another indicator that an area will hold its value is a limit to the supply of homes coming on to the market. Thus areas with a strong local history - and so more stringent conservation protection - are less vulnerable to a downturn.

“Properties in national parks such as Dartmoor and Exmoor are fairly stable too,” says Robin Thomas, of Strutt & Parker Exeter. “There are very few properties, and planning policy to allow new buildings is extremely tight, allowing only limited additional housing on the edge of villages and towns within the parks.”

FACT FILE

Prices rose in prime Central London by 0.6 per cent in February, says Knight Frank, which predicts 3 per cent growth in 2008.

The prime hotspots were Kensington, with monthly growth of 1 per cent, and Chelsea, at 0.7 per cent. Prices in Chelsea have increased by 30 per cent in a year.

The general London picture is more upbeat, with increases so far this year of between 1.5 (Land Registry) and 3.4 per cent (Primelocation).

The South East is also proving resilient, according to Hometrack. Demand for housing fell by 45 per cent nationwide after the credit crunch, but in the South East last month, new-buyer registrations were up by 10 per cent.

Paula Hawkins

Source: ' 'The Times' '

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