House prices in prime markets outside London have increased by 8.5% year-on-year, marking the strongest growth in a decade.
Across Britain, homes with bigger gardens, country houses priced at £2 million-plus, and properties by the sea are helping to drive price growth, according to the research from estate agent Savills.
It said the 8.5% annual increase was the highest recorded since 2010.
The prime property market generally includes the top 5% of homes by value.
But there are early signs that some of the urgency is coming out of the market.
While it remains a “seller’s market” in many areas, greater price sensitivity is expected over the remainder of the year, according to Savills head of residential research Lucian Cook.
A stamp duty holiday is due to be tapered from Thursday July 1.
However, the top 5% of the market continues to be fuelled by lifestyle changes among wealthier home buyers, who are often competing for the best homes in a market which has limited stock, Savills said.
It said this has been particularly the case in the prime coastal and £2 million-plus country house markets, which have had annual price growth of 14.6% and 12.9% respectively.
Homes in some parts of Britain may still have a way to go to reach their price “ceiling”.
In the country house market, values are now around 11.0% above their 2007 peak in the Cotswolds in southern England, but still around a third below their previous high point in Scotland, Savills said.
Mr Cook said: “Demand has continued to outstrip supply in many of the most sought-after prime regional markets and this has led to rapid price growth, most notably in markets that had long lagged London in their recovery over the past decade.”
He continued: “We’re starting to see a gap open up between buyers and sellers in terms of the pricing.
“With the impetus of the stamp duty holiday coming to an end and evidence that what has been fairly intense buyer demand may be softening, it will be more difficult for price growth to keep pace with sellers’ rising expectations of the value of their home in the way it has in the past year.”
Property price growth in prime central London remains relatively subdued at just 0.5% year-on-year, given ongoing constraints on international travel, the report said.
Within central London, the most robust markets have been Notting Hill, Bayswater and Holland Park, where there has been strong domestic demand for family homes from UK residents, Savills added.
Six-bedroom properties in west and south-west London have been particularly in demand, it said.
More generally across London, the desire for more space means demand for houses has been stronger than for flats.
Mr Cook said: “Whichever way you look at it, the past year has been about buyers with the means to do so looking for more space both inside and out, and their willingness to pay a high price for that space.
“We have continued to see price growth over the past quarter despite the looming stamp duty holiday deadline. Our June client survey told us the majority of prime market buyers (71%) are not concerned about the removal of the stamp duty holiday, while just 5% of those still hoping to complete by the end of June said they might reconsider their purchase.
“So while stamp duty is clearly not a major factor for the prime markets, we do expect to see some of the urgency coming out of decision making.
“More stock is expected to come to the market as the vaccine rollout continues and social distancing measures are lifted. As stock constraints gradually ease, so upwards pressure on values will ease, and the realignment of buyer and seller expectations will be vital in order to maintain market momentum.”