Prime country house prices rose on average by almost one per cent in the third quarter of the year, the first overall increase since autumn 2007, says Knight Frank...
A surge in demand and a shortage of quality property on the market are the principal reasons why prices are rising again.
Knight Frank says the market is also being driven by returning buyers, especially large numbers of people who are currently renting looking to buy again.
These people sold at or near the peak of the market and were hoping the interest from their sales would cover the rent. But miserly bank rates mean some are being forced to eat into their capital, eroding their future purchasing power.
The price increase was the greatest in the Home Counties (2.1 per cent) where values rose for the second quarter running. The recovery is also extending into the South East (+0.6 per cent) and Central regions (+0.7 per cent).
However, on an annual basis, average prices fell by 13.4 per cent and are still 20 per cent below their Q3 2007 peak.
Andrew Shirley, Knight Frank’s head of rural property research, commented: "The average price of quality houses in the countryside increased by 0.8 per cent in the third quarter of 2009, compared with a decline of 0.9 per cent in the second three months of the year.
"In August, usually a month of limited activity, the number of houses sold by Knight Frank in the Home Counties increased 85 per cent compared with the same month in 2008. By contrast, the number of houses put up for sale fell by 27 per cent.
"As long as this imbalance remains I believe that prices will continue to remain steady or gradually strengthen further. The big question now is how much pent-up demand from frustrated potential buyers remains in the system to maintain the momentum. An increase in interest rates or availability next year could dampen the recovery."
Rupert Sweeting, Knight Frank’s head of country department, added: "It now appears that the prime country house market has bottomed out across most of the country. We should, however, not get too carried away.
"To my mind the rest of 2009 looks like an ideal window for potential vendors. Demand remains strong and the market is slowly being starved of quality stock. For those with sensible deposits, interest rates are set to remain extremely attractive. We are seeing more and more instances of competitive bidding and it is now no longer a rarity for a property to sell for over its guide price."
"The picture for 2010 is less clear and the prospect of a spring General Election, with the uncertainty that a likely change in political emphasis always engenders, only muddies the waters."