London/Country Arbitrage11 April 2018
One of the main characteristics of the prime property market between about 2006 and 2014 was the massive difference between London and the Country. Longstanding readers of our blog and market comments will be familiar with our contention that, until the early Noughties, the country and London markets rose in tandem. During that time if you sold a medium sized family house in Scarsdale Villas in Kensington it enabled you to buy a nice Rectory in a good village in Hampshire. This trade had been a constant since we set up in business in the early Eighties.
With the Financial Crisis, this changed. London surged in value but the Country flat-lined - to some extent a self fulfilling trend as the more London rose in value, the less inclined were London owners to risk a move that might only be one way as they would never be able to afford to get back into London. This culminated with a Scarsdale Villas house entitling you to two Rectories.
In 2014 this changed - and prime London house prices have come off about 25% according to our Property Vision Central London Index. At the same time there was - and is - a mini boom in the Country market where pent up demand and relative value compared with London have carried County prices higher - so much so that the Scarsdale Villas house now ‘only’ entitles you to a Rectory and a half.
Mean reversion is a powerful force. The question now is whether London is expensive - or the country cheap? The momentum is currently with the Country.