Scotland's Prime Property Market

Scotland's Prime Residential Market
 
Strongest market since 2008

8 September 2017, by Faisal Choudhry

Scotland’s improved market performance is due in part to the resilience of Scottish buyers who have become used to political change…

 

...combined with a return of buyers from outside Scotland, who are attracted by the value gap and the reduced momentum with regards to the Scottish Independence debate. However, the political landscape is still dictating the market in some price bands, with higher rates of property tax in Scotland discouraging movement amongst local buyers and doing little to attract inward investment from further afield.

Market activity across Scotland is at its highest level since 2008, with a total of 101,421 residential transactions during the year ending June 2017. The bulk of activity takes place up to £400,000 and this is where the majority of the growth in recent years has happened. This market has been assisted by low mortgage and taxation rates, along with Government initiatives such as Help to Buy.

The bracket between £400,000 and £750,000 outperformed the wider market, recording an 8% annual growth in transactions. Meanwhile, the market above £750,000 is struggling to adjust to Land and Buildings Transaction Tax (LBTT) and witnessed a slight annual drop in transactions.

Chronic lack of supply lifting prices

While transactions continue to increase, house prices are also rising, underpinned by a lack of supply. According to recent surveys by the RICS and our own research, there has been a drop in new stock coming onto the market, especially in Edinburgh.

House buyers in Scottish cities are facing a vicious circle of demand exceeding supply. The trend in Scottish cities is now to buy before selling – quite the reverse of the trend in the country house market. This lack of choice is compounding the problem, with buyers unwilling to sell their current house until something suitable can be found. As a result, we are witnessing competitive bids and strong premiums for properties launched onto the market at realistic prices, particularly in city and suburban hotspots. The time taken for properties coming onto the market to reach a sold status across Scotland’s cities has dropped to nine weeks, compared to 12 weeks earlier in 2017.

These factors have fuelled Scottish house prices, which increased annually by 2.9% in June 2017. A similar trend was also witnessed in the Savills Prime Scotland index, which increased in value by 3% during the second quarter of 2017 across Edinburgh and Glasgow.

Slow rates of growth in the short term

Our current forecasts, announced at the end of last year, have already taken account of prevailing political and economic uncertainty and assume two years of low house price and transactional growth. This reflects the short-term impact on buyer sentiment due to economic and political uncertainty, as Britain negotiates to leave the EU. Once the dust settles, it will be broader economic trends that will dictate housing market performance.

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