Town beats country for luxury property

The cost of buying a country pile has stalled in the past two years, according to research, in stark contrast to London’s most sought after addresses, where resilient foreign and domestic demand has fuelled rapid growth in value.

The price gap between the property types is the widest on record, putting Britain on course for a two-speed prime market.

The divergence in fortunes between the London and country property markets means that a £5m property bought in the capital in 2009 is worth £6.75m, while a £5m country home has risen only to £5.5m during the same period, according to research from Knight Frank, the property services group.

One of the main drivers of the strong London residential market has been an influx of capital from overseas buyers. Many are looking for a stable investment to shelter their wealth from the turmoil in global financial markets.

Foreign buyers tend to be less enamoured of rural ownership and the romantic notions attached to it.

“The traditional ‘grandeur’ image of the country house is very popular but foreign buyers want the same level of finish that you get in a £5m house in London or Monaco – basically, something which is groomed on day of purchase,” said Liam Bailey, Knight Frank’s head of residential research.

Aside from domestic buyers, one group that Mr Bailey identified as a significant force in the top-end country house market was Russian buyers.

Buyers from Russia, where the idea of owning a country retreat, or dacha, within easy reach of the city is well established, accounted for 10 per cent of purchases in the £5m-plus country house market. That compares with Middle Eastern and Asian buyers, the backbone of the international market in London, who account for 4.8 per cent and 2.5 per cent respectively.

The country market varies, however, with counties in easy reach of London and Heathrow airport, such as Berkshire and Buckinghamshire, the most popular among international ­buyers.

“With the exception of the big estates in the home counties, there is just not the international element to support the growth,” said Mr Bailey.

The divergence is even more pronounced in the market for properties worth more than £1m. Here, average prices fell 3.3 per cent across all UK regions but rose 14.1 per cent in prime central London, according to Savills.

Lucian Cook, director of residential research at Sav­ills, said the relative value for money of country homes should stimulate buying activity.

“We would normally exp­ect to see a flow of equity out of London in the wake of price recovery in the capital but that is not yet happening,” Mr Cook said

“It’s not that domestic owners have stopped trading up but they are trading up within London. The flow of City money that would normally be the lifeblood of markets such as Guildford is staying put in Parsons Green.”