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Scottish Residential Market Report Q3 2019

Q4 2019

Our latest Scottish Residential Report shows that despite softening in 2019, Scotland continues to buck the UK trend

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The political situation remains unclear and continues to impact the economy

Brexit delays have led to prolonged caution and uncertainty with confidence remaining subdued. The Scottish Consumer Sentiment Indicator remained negative at -6.6 in Q3 2019. The indicator fell by 0.4 points on Q2 with weakening sentiment over the quarter. Although Scotland’s GDP has grown by 0.6% compared to the same quarter in 2018, this was revised down from the first estimate of 0.7% and remains slower than equivalent UK growth of 1.3%. Improvements to infrastructure and connectivity remain significant for the economy and population, especially across rural Scotland.

Although the market has softened, Scotland continues to buck the UK trend

Properties that are priced sensibly and offer the best location, amenities and accessibility remain sought after. Recent data from Zoopla showed that homes in Glasgow and Edinburgh are selling in five to six weeks and for 6 to 7% more than the asking price. Registers of Scotland data shows that properties within the £525,000-£750,000 and £1m+ price bracket have seen volumes increase over the year in Q3 2019 with properties over £1m seeing sales increase by almost 19% compared to the same period a year ago. The latest figures show that Scottish residential properties are selling at a 38% discount to the average price in England and Wales and its relative affordability continues to improve performance.

Volumes have held steady but remain significantly lower than in Q3 2007 when most markets saw transaction levels peak

Volumes across Scotland totalled 25,806 in the third quarter of this year according to RoS, just -0.1% down on the same quarter in 2018, an 11% increase on Q2 2019. Across the cities of Edinburgh (-35%) and Glasgow (-40%) sales volumes were down on their peak in Q3 2007 however they were up 49% in the City of Edinburgh and 35% in Glasgow City compared to 10 years ago in Q3 2009. Overall sales volumes across the City of Edinburgh were up (1.2%) on last year with 3,159 properties sold in Q3 2019, an 8.8% increase on last quarter. This was a fall of -10% on Q3 2017. Properties sold in Edinburgh accounted for 65% of the total volume priced over £1m that sold in Scotland during 2018-19. The EH3 postcode which includes New Town, West End, Inverleith and Warriston saw the highest volume of these sales with prices averaging £1,428,120 in the year 2018-19.Not taking sales over £1 million into account, the average sold price for Edinburgh City reached a 10 year peak of £273,753 in Q3 2019. Limited availability saw volumes fall in prime city centre locations during Q3 2019 including EH3 5 (-18.2%) and EH3 6 (-36.4%). In Edinburgh’s EH10 postcode prices fell over the year to Q3 in EH10 5 (-3.7%) and EH10 7 (-2.7%) despite a significant fall in volumes. In contrast EH10 6 saw prices rise 33% over the year as well as volumes (34%) as a result of new development that commands a premium over existing stock. In Glasgow City prices averaged £164,503, 3.4% more than the previous quarter despite an annual fall of -0.9%. In G12, one of Glasgow’s prime city centre postcodes, prices reached £289,668 almost 1% up on the previous year and nearly 40% less expensive than the Edinburgh city centre average.

Regional performance remains variable

Although average prices fell slightly (-0.1%) over the year in Perth & Kinross in Q3 2019, at £206,776 they are still almost 12% higher than the Scottish average. Property across the PH1 postcode saw significant annual growth (21.5%) reaching an average of £184,010 in Q3 2019. Across PH2 prices fell slightly (-0.3%) over the year to £213,378. Location continues to drive performance with Clackmannanshire, Stirling and Falkirk seeing strong price growth in Q3. In Stirling prices averaged £215,485 in Q3 2019, increasing 4.8% over the year since Q3 2018, 11.8% up on Q2 2019 and 16.4% higher than the average across Scotland. Falkirk saw prices increase 4.6% over the year to Q3 2019 with Clackmannanshire seeing the strongest growth of 11.6%. Dollar remains popular with prices averaging £368,745 in the third quarter of this year. Its proximity to the capital has meant that East Lothian continues to be one of the best performing regions in Scotland. East Lothian saw some of the highest annual growth (3.5%) in Q3 2019 with prices currently 36% higher than the Scottish average. Despite a continuing upward price trend, the average price in North Berwick is almost 20% lower than in Edinburgh city centre. Across Dundee City, Q3 2019 prices averaged 146,229, a 2.8% increase on Q3 2018. Although the market continues to see further correction in pricing, Q3 2019 data shows that across Aberdeen City, average prices were -3.5% down on Q2 2019, increasing slightly (0.3%) compared to the same quarter in 2018. The Highland market continues to see price growth with average prices reaching £186,221 in Q3 2019, a 1.6% quarterly increase and 1.0% up on the previous year.

Uncertain economic outlook and regulatory environment restricting supply

Despite the continued increase in new housing completions, the number of properties being built still falls short of demand.Many of the properties which come to the market are now generating competition, often resulting in a closing date.Sterling continues to offer value to international purchasers and increasing yields and rents for buy-to-let properties across Scotland have led to a rise in investor interest. However Additional Dwelling Supplement (ADS), the introduction of a tourist levy and further moves to cap Airbnb rentals, including a likely amendment to the planning bill to regulate short term lets, are affecting the market. In rural areas and communities the Scottish Government is considering the expansion of permitted development rights (PDRs) for agricultural buildings. This could remove the need to apply for planning permission for small-scale developments and help boost supply levels.

Read more in our Strutt and Parker Q3 2019 Scottish Residential Report