Resilience in Scottish housing market

Q1 2019

The overall picture for the Scottish housing market remains resilient, says property agency Strutt & Parker.

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Strong buyer demand coupled with limited supply of quality stock in desirable locations continued to characterise the sector while the shortage of new property coming to the market strengthened asking prices.

The latest published data showed that the overall market value of residential sales across Scotland increased more than 5% throughout the year in Q4 2018 while the average property price rose 3.2%. Meanwhile, the latest RICS results show that although average 12-month sales expectations were mostly depressed across the UK, Scotland was one of the few markets where the net balance was positive.

Susanna Clark, director of research for Strutt & Parker in Scotland, said: “Whilst the market is generally performing well, it is characterised by ‘property specific’ trends in pricing performance and transactional activity and it is difficult to define the market in broad terms.”

Data from the RoS indicated that pricing remained strong for the best properties in the most desirable, accessible locations. For example, continued demand and supply constraints in Edinburgh drove some of the strongest price growth with average prices increasing by 9% year on year in Q4 2018. Average residential prices in Edinburgh were 50% higher than the Q4 2018 Scottish average of £181,820.

Ms Clark said more than 65% of the property transacted in Edinburgh’s prime EH10 postcode – encompassing Morningside, Bruntsfield, The Braids, Merchiston and Cluny – was over £300k with prices at the higher end of the market averaging £558,250 in Q4 2018. Overall, prices in EH10 were up 9% over the quarter in Q4. In the sought-after EH3 postcode, which includes New Town, West End, Inverleith and Warriston, properties over £700k averaged £1m, accounting for 8% of the market.

Persistent demand and supply constraints ensured that Glasgow saw strong price growth with average prices increasing 3.1% year on year in Q4 2018. Property priced over £300k grew 4.2% over the quarter and accounted for over 7% of the transactions in Q4 with the prime postcodes on the fringes of the city continuing to command some of the highest prices.

In East Lothian, prices were 38% higher than the Scottish average, 5% up on last year and 3% higher than last quarter. Average prices in Midlothian were 24% higher than the Scottish average, 11% up on Q4 2017 and 5% higher than in Q3 2018. In West Lothian prices are 3% lower than the average but showing signs of growth with a 5% annual increase and a 2% quarterly rise in Q4 2018.

Overall sold prices in Fife were over 3% up on the previous year in Q4 2018 but -12% lower than the Scottish average. This masks significant strength in certain areas. For example, in St. Andrews, prices were 70% higher than the Fife average, 9% up on 2017.

Outside the central belt, Aberdeen City saw prices fall -4% over the year in Q4 2018 indicating further correction in pricing. However, as sentiment improved and confidence began to return to the market, prices in Aberdeenshire started to increase and were up 2.3% on the previous year at the end of 2018. Angus saw a 10.5% rise in average prices in Q4 2018 compared to the same quarter in 2017. Annual sold prices in Dundee City where the new V&A gallery opened in September were 3% higher in 2018 despite being down slightly at the end of the year (-0.2% down in Q4 2018 compared to Q4 2017).

In Perth & Kinross, average prices increased by 2.5% over the year in Q4 2018 but fell by -4.6% compared to the previous quarter. Prices were 9% higher than the average Scottish price and, although relatively stable over the year, the market was increasingly fragmented in terms of performance. Property across the PH1 postcode priced over £300,000 averaged £428,400 in Q4 2018, increasing by 13% over the quarter.

Meanwhile, average sold prices across the Highland area grew by almost 5% over the year. IV4 – comprising Beauly, Loaneckheim, Fanellan, Tomich and Kiltarlity – was the most expensive postcode in the region in Q4 with average prices almost 50% higher than the Highland average.

Due to its relative affordability and desirability, Highland showed sustained positive growth and, despite the continued rise in prices, the Highland area remained considerably less expensive than many other parts of the UK. Although the volume of sales over the quarter fell in IV1 and IV3, the IV2 postcode saw a significant increase in transactions as a result of new home supply on the fringes of the city.

Ms Clark said: "Overall, stock levels remained low with a knock-on effect on transactions which have fallen more than 30% since their peak in 2006. However, while the picture was mixed across different regions, the volume of Scottish residential sales increased by 1.8% over the year to Q4 2018.”

In Edinburgh City, where stock levels were extremely tight, transactions were down 4% on Q4 2017 but 2% up on Q3 2018. The largest number of homes sold over £1 million during 2018 were concentrated in Edinburgh’s prime postcodes but overall volumes were still down in EH10 and EH3 over the quarter.

Volumes in East Lothian were 27% up YoY, 12% up on last quarter. Midlothian sales dropped 1% annually but rose 12.5% over the last quarter. Transactions in West Lothian were down 1% YoY and flat over the quarter.

The number of sales across Perth and Kinross increased by 5.6% over the year in Q4 2018 but there remained a shortage of quality stock across much of the county. Additionally, average residential volumes across Highland fell by almost 7% compared to the same quarter a year ago, as a result of limited supply.

Ms Clark said: “While a combination of a lack of stock and a degree of uncertainty relating both to the interest rate outlook and Brexit has had an impact on activity, the overall picture for the residential market remains resilient.

“Strong buyer demand coupled with limited supply of quality stock in desirable locations will continue to characterise the market across Scotland. New residential stock has led to increased activity in the periphery and new homes market and this should ease some pressure on supply levels going forward. We expect to see some decline in activity this year but pricing should remain relatively stable throughout 2019.”

For more information, please contact Joanna Lindsay.

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