Prime markets in the East Midlands are set to benefit from an improvement in buyer sentiment (Savills UK)

The prime housing markets across the UK all saw positive annual price growth in the year to June 2014, rising by 5.7% on average. While price growth in the East Midlands was slightly more subdued at 4.3%, this is the strongest year-on-year growth since mid 2010.

The market reached a turning point last summer and positive quarterly price growth has been seen every quarter since. Over the longer term, average values still remain -14.8% behind their 2007 peak, in line with the average seen for prime property across the midlands and the north. However, the average masks a divergence in performance as urban locations have seen stronger recovery since peak compared to more rural locations.

The city market in Nottingham, in particular, has been boosted by strong demand from investors who are attracted to 1 and 2 bedroom flats which provide a stable income stream and achieve gross yields of 5-6%. In suburban markets such as Mapperley Park, Nottingham and commuter villages including Repton, South Derbyshire, local wealth from owner occupiers has been a key driver of demand.

The prime housing markets in the East Midlands are largely dependent on demand from wealth generated in the local economy. 
 With the economic recovery, initiated in London and the south east, gaining a strong foothold, we believe 
that the prime East Midlands housing market should begin to benefit from an improvement in buyer sentiment over the next 12 – 24 months.

Positive employment growth is expected across the majority of sectors, with professional and administrative service sectors, especially in Nottingham, expected to see the largest increase. As these high value employment markets become increasingly important, local wealth will continue to strengthen the demand for housing in commuter locations to the main cities and towns.

While the ripple effect from London has been slow to arrive thus far, we expect the number of buyers moving from London to increase, as they take advantage of the comparatively affordable prices. Since the downturn, the value gap between London and the rest of the country has widened to an all time high.

However, by 2016 we expect the house price growth in the 
East Midlands to outperform London as the market moves in 
to the next stage of the cycle.