No escape

Rural property, long popular with those seeking country retreats, is now vulnerable to the downturn afflicting almost all sectors of the market

Britain's mid-range country homes market has suffered price falls over the past 12 months. Now the top end of the country house market, which had stayed buoyant over that period, is looking vulnerable to a downturn.

According to estate agency Knight Frank, rural property prices dropped 4 per cent during the third quarter the year, the biggest fall since the company started its index in 1995. This means overall values for country houses slid 7.9 per cent over the 12 months to the end of August, the agency says.

Smaller residences, such as cottages, suffered the biggest falls in values, while manor houses fared less badly, it reveals. But the most expensive homes, those worth over GBP5million (HK$68 million), increased in value slightly, the agency says.

Demand for farmhouses and cottages was badly hit by the evaporation of mortgage credit and a slump in demand for holiday homes, the agency says. The turmoil in financial markets is expected to eventually feed through to the top of the market and prices for #5-million homes are likely to start falling, it adds.

'We could be looking at the first year-on-year fall for these 'trophy' properties by the new year,' says Andrew Shirley, head of rural land research at Knight Frank.