Spotlight: Scotland's Prime
Residential Property Market

Scotland Prime Residential Property
Scotland's Prime Residential Property Market

15 September 2016, by Faisal Choudhry

Despite the Brexit vote it is business as usual in the Scottish market so far

The value card is trumping politics in buying decisions in the post EU Referendum era in Scotland and the market is performing better than predicted, with more buyer activity compared with the same period last year.

While it is relatively early days since the referendum, and question marks remain with regard to the speed, terms and conditions of our exit from Europe, a picture is beginning to emerge, which reveals the Scottish housing market to be resilient and in good shape in the short to medium term.

 

As we know, the triggering of Article 50 by Prime Minister Theresa May will begin a two-year process of exit talks before the UK formally leaves the European Union. History tells us that markets generally do not like uncertainty, and the fortunes of the UK housing market are inextricably linked to the health of the wider UK economy. Furthermore, discussions around a potential second Scottish Independence Referendum could add another layer of uncertainty north of the border.

In recent weeks, data covering the performance of the services, manufacturing, employment and retail sectors since the EU Referendum has been encouraging. According to the Office for National Statistics (ONS), the number of people unemployed in July this year fell by 8,600, compared to the previous month. The retail sales figures (often used by commentators as a gauge of consumer confidence) reveals a monthly 1.4% increase in July. At the time of writing, the value of the British Pound compared to the US Dollar is at the lowest point for 31 years, making UK exports relatively competitive, including real estate for overseas purchasers.

It has been business as usual in our Scottish residential market. Our agents’ survey reveals that despite the prospect of the UK leaving Europe, there has been a negligible change in Scottish prime residential values above £400,000 since the vote. In fact, according to our Scottish Prime Index, values are currently 1.3% higher than in 2015.

Across Scotland in July and August this year, we have registered 30% more new buyers, and our property viewing figures are up 40%, compared to July and August last year. Interestingly, around a third of our new buyer enquiries are coming from outside Scotland. Our feeling is that Scottish buyers have become resilient to a fast-changing political landscape. Having seen two Referendums, a General Election, as well as local Scottish elections, many are now keen to move on with their lives.

There is certainly evidence that the Scottish prime market up to £600,000 is enjoying something of a purple patch. However, the market above this level in some areas is struggling to adjust to the higher rates of Land and Buildings Transaction Tax (LBTT). Consumer confidence may begin to dip amidst Brexit negotiations, but while there may be more subdued levels of growth in the longer term, the trend remains upbeat. An exception to this generally positive outlook is the Aberdeen area market, which after seven years of phenomenal growth has seen a 12% annual drop in transactions, impacting Scotland’s overall residential property market. Despite this drop, the number of residential transactions across the Aberdeen area is currently 5% higher than the level five years ago.

For the time being, the fundamentals for a healthy residential property market are in place. Mortgage regulations are tight and lending rates are favourable. In addition, LBTT rates are benefitting the market below £400,000, which comprises the bulk of Scottish residential sales.

Scotland has always attracted buyers from the south and much further afield, particularly those with pre-existing Scottish connections. It is an established trend and we are continuing to receive such interest due to the quality of life and comparative value for money that Scotland offers. Those with links north of the border, who are living in London and the South, may conclude that now is the time to sell, and invest their considerable equity in Scotland, taking advantage of the record value gap. Indeed, value appears to be more important to buyers than politics in the current market.

 

 
prime housing scotland

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Key contacts

Faisal Choudhry

Faisal Choudhry

Director, Scottish Research
Residential Research

Savills Glasgow

+44 (0) 141 222 5880

 

Emily Dorrian

Emily Dorrian

Associate
Residential Research

Savills Glasgow

+44 (0)141 222 4132

 

Lucian Cook

Lucian Cook

Director
Residential Research

Savills Margaret Street

+44 (0) 20 7016 3837