The home on the left is located in Walton-on-Thames and measures about 9,500 square feet. It is on the market for $9.258 million. The house on the right is located in Belgravia, the heart of prime London. The three-bedroom apartment has 2,057 square feet and is listed for $9.174 million.
Savills (2)

Property buyers in the U.K. are minding the gap.

A record divide between prices in prime central London and prime country locations is creating a stir in the British capital, as buyers cash in on their city pads and swap them for country retreats.

Strong growth since 2010 means prices in prime central London are 38% higher than at the peak of the market in 2007, according to research by estate agency

Savills,

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Aug. 7, 2014 5:07 pm


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and stand at an average £5.8 million, or $9.8 million. At the same time, high-end country homes, which were hit hard by the downturn and have been slower to recover, are 5.6% below peak prices.

“There is an incredibly wide gap between prices, which widens the further out of London you are prepared to go,” said

Lucian Cook,

director of residential research at Savills. “The people who have the real advantage are those who make the wholesale lifestyle choice and move beyond London’s commuter zone.”

London homeowners have noticed the price differential. A study by Hamptons International published in June reported a 75% annual increase in Londoners buying outside the capital. In the past year, more than $25 billion was spent on 44,000 properties—the highest volume and value since 2007.

The property on the left has a one-bedroom pied-à-terre listed for $1.345 million and located on one of prime London’s grandest streets. The house on the right is located in the village of Brightling. The thatched cottage dates from 1570 and is listed for between $1.262 million to $1.338 million.
Winkworth/Freeman Foreman (2)

Some of these buyers are exiting London to avoid a 7% stamp duty levied on homes purchased for more than £2 million ($3.37 million) and are opting for less expensive properties in the country. There are also fears that a new mansion tax may be introduced after next year’s general election. The strength of the pound also has made real estate more expensive for overseas buyers, encouraging them to look for better value outside London.

Current listings illustrate just how big the London-country divide has become. Brereton Hall, one of England’s finest historic houses, is on the market for $10.9 million. The house, built in 1586, is in the county of Cheshire, about 180 miles from central London. Behind the imposing castellated facade is living space totaling more than 27,000 square feet. Alternatively buyers could pay $11.1 million for a 989-square-foot, one-bedroom apartment in one of prime central London’s most prestigious buildings, One Hyde Park in Knightsbridge.

In another example, a buyer could pay $9.258 million for a 9,500-square-foot contemporary house in Walton-on-Thames, 18 miles southwest of central London. In Belgravia, in the heart of prime London, a three-bedroom apartment that is less than a quarter of the size is listed for $9.174 million.

Buyers prepared to commute from the village of Brightling, 60 miles southeast of central London, could move into a thatched cottage that dates from 1570 and is on the market for between $1.262 million to $1.338 million. It has four bedrooms and two bathrooms in 1,832 square feet. Meanwhile, for $1.345 million, a buyer in prime London could get a one-bedroom pied-à-terre ocated on one of the grandest streets in Knightsbridge.

The country house on the left is called Brereton Hall. It measures more than 27,000 square feet and is listed for $10.9 million. The prime London property on the right is a one-bedroom apartment that measures 989 square feet and is on the market for $11.1 million.
L-R: Fine and Country/Knight Frank; Strutt Parker

Some buyers are attempting to keep a foot in both camps.

David Adams,

managing director of John Taylor London, said some owners in prime London are downsizing to a pied-à-terre and buying a country house as well.

Real-estate agents believe the relative affordability of the countryside may not last. Real-estate agents Knight Frank recorded a 1.1% rise in the value of prime country properties, those worth $842,000 or more, in the second quarter of 2014. This is the sixth consecutive price rise in a sector that was laid low by the recession and brings annual price increase to 5.2%.

Meanwhile, the significant price growth of prime London has been cooling off since the start of this year.

Hugo Thistlethwayte,

managing director of buying agency Prime Purchase, says that now that price growth in prime London has slowed, “there is less reason to hang around” in hopes of higher profits.

But cooling off isn’t the same as collapsing, said

Richard Barber,

a partner at W.A. Ellis estate agents who sees the current prime London scenario as a normal correction to a market that has been flying for several years.

Nonetheless, Mr. Cook of Savills agrees that now could be a smart time to escape from prime London. “If you are in a mind-set to make a lifestyle choice,” he said, “I think there is as good an opportunity as there has been … whether it is buying a bigger, better property or releasing some cash to pay school fees or whatever else.”