While the vast majority of us are preoccupied with preparing our homes for winter, those at the luxury end of the property market remained concerned with the value of their investment. According to recent figures, the number of property sakes with at least a million pounds in the UK has fallen steadily throughout the first two quarters of 2015, which in turn represents a noticeable decline of 11% in comparison with the same period last year.
Throughout 2014, the UK property market thrived on the back of soaring price points and international demand, with both London and the surrounding regions benefitting from a huge influx of foreign cash from China and the Asia-Pacific region. Even regions further north such as Birmingham began to experience an increased overseas demand for luxury homes, as the UK became the standard-bearer for quality and high-end living. The recent figures will concern some, however, as they may hint at a decline in the value of luxury property throughout Britain.
The drop in the value of luxury property has been consistent and sustained, while it is in stark contrast to the growth that was prominent during the first-half of 2014. More specifically, the first six months of 2014 saw an increase of 46% in the luxury property market, while growth was also sustained (at a lower rate at least) for the remainder of the year. This trend has reversed in 2015, however, while the drop represents the first decline in high-end sales since the first half of 2012 when the number of sales in excess of one million fell by 7% year-on-year.
This will instantly sound alarm bells to afflicted home-owners and international investors, who may be concerned that there is a fall in demand for high value properties. In turn, this could mean that those who have invested heavily in a luxury piece of real estate may find that the value of their asset has depreciated over the course of the last 10 months, raising the prospect of significant losses and the onset of negatively equity at some point in 2016.
While it is easy to read statistics and react emotively, however, it is important to analyse in the right context in order to gain some much-needed perspective. Since the first half of 2005, for example, the rate of million pound home sales has actually risen by an astonishing 264%. The data released by Lloyds bank also revealed that while the high-end luxury market outperformed all other sectors in 2014, the recent decline has simply mirrored wider trends in the UK (with the sale of properties under £1 million having also fallen by 11% during the same period).
This reveals a slightly different picture, as the luxury market cannot forever remain immune to external market conditions. With this in mind, it is clear that a lack of available housing has finally impacted on the luxury market, creating a situation where prices have risen exponentially and demand has fallen away. This may only be a short-term trend, and one that may be reversed as prices consolidate and more properties are listed for sale on the market.