In contrast to the prime markets of London, the prime regional markets saw price falls over the course of 2011 averaging -3.3%.
Weak buyer sentiment and a lack of wealth migration from London were the main causes for a second slip in values that continued into the final quarter of the year.
While price movements have generally been negative, transaction levels in prime areas outside of London have been stronger than the remainder of the market.
This is demonstrated by looking at transactions in three relatively high value markets. Across England and Wales, transactions in the 12 months to the end of September 2011 were 47% below the average for the five years prior to the onset of the credit crunch, yet in Bath and North East Somerset transactions were within 30% of their pre-credit crunch norm, York 36% and Surrey 34% (See Table 1).
Modest growth areas
Very few areas ended 2011 with prices higher than 12 months previous. Only the likes of Sunningdale, Weybridge and Henley saw positive annual price growth and overall this was modest.
It was fuelled largely by the market for large country houses in the Home Counties and the South East. This sub-market was the only one to buck the trend, delivering annual price growth of 9.5%. This was the only market to show parallels with Prime Central London by capturing wealthy overseas demand.
Overall, prime regional property prices in the South East proved to be the most robust with prices falling by a modest -2.0% (See Table 2).
Realistic pricing
At the other end of the scale, prime property prices in Cornwall saw significant price falls as London money failed to find its way into the second-homes markets.
This required prices to be re-pegged to the budgets of more local buyers looking to secure their main residence. However, there is evidence asking prices have been adjusted, which has stimulated demand to get the market moving.
The resulting falls in prices in this market distort the figures for the South West as a whole, where otherwise prices fell by -2.4% in the year, much less than in the markets of the Midlands, the North and Scotland. These areas bore the brunt of price falls as values fell by an average of -4.7%.
This leaves prime residential prices in the Midlands and the North 24% below their 2007 peak, meaning vendors need to price realistically to demonstrate the value of prime property stock in these areas relative to the rest of the country.