Scottish House Price Index from Walker Fraser Steele
- Average house price in Scotland grows by 9.3% over last 12 months
- transactions up by 11% on 2019 levels
- Average house price up 0.2 in November, now stands at £213, 109
- 31 of 32 Local Authorities continue to see rising average prices over year to end November
Alan Penman, Business Development Manager at Walker Fraser Steele, comments: “The national growth rate in house prices of 9.3% remains exceptionally high. The ongoing ‘race for space’ continues to support demand for properties that offer the room to live and work in a pandemic environment. Working from home has changed where people want to live and the type of property they want to own.
“The subsequent increase in top-end sales last year has been a result of home movers seeking out properties better suited to their updated needs. Additional support was provided through the tax savings from the Land and Buildings Transaction Tax holiday that was available up to the end of March 2021.
“This encouraged the whole market to be more adventurous. Even now, competition among purchasers, a lack of suitable stock, and the continued very low interest rates supporting affordable mortgage debt means that there is currently plenty of good headwind to sustain prices.
“So while rates of growth in house prices may be stabilising in Scotland, the housing market in November still saw an increase in the average house price of £484, which is 0.2% higher than in October.
“Sales volumes from May to November 2021 look roughly on a par with, or slightly ahead of, previous years, perhaps suggesting that the market has now returned to its pre-pandemic transaction levels, but in summary it is fair to say Scottish house prices have enjoyed another strong year often outperforming the UK average.”
Commentary: John Tindale, Acadata Senior Housing Analyst:
“The November housing market Last month we indicated that Scotland’s rate of house price growth was starting to slow, as the annual rate reduced from 13.1% in September to a (revised) rate of 11.5% in October. This month (November), the rate of annual growth continues to reduce – to 9.3% – which represents a modest quickening in the rate of decline from October.
“We would point out, however, that a national growth rate in house prices of 9.3% is exceptionally high, and does not occur particularly frequently. For example, in the 166 months since January 2008, the national growth rate in house prices in Scotland has only exceeded a rate of 9.3% on 10 occasions, with 7 of those occurring during the pandemic in 2021. Historic records would therefore tend to suggest that price growth will slow.
“However, demand for properties with more space remains high. Rightmove reported that on Boxing Day 2021, property searches on their website set new record levels, with Glasgow featuring as the fifth most searched-for location in 2021, while Edinburgh stood in ninth position.
“Competition among prospective buyers for properties remains strong, which is helping to maintain current asking prices. In addition, interest rates remain low on a historic perspective, even if the Bank of England has been dropping hints that rates are likely to move up in the near future.
“In Scotland’s housing market in November, there has been an increase in the average house price of £484 in the month, which is 0.2% higher than in October. The reason for the fall in the annual rate of price growth this month arises from the strong performance in the market twelve months previously, when prices rose in the month of November 2020 by 2.3% – an increase of only 0.2% in November 2021 hence pales into insignificance by comparison.
Figure 1 below shows the movement in annual growth rates over the last 2 years. Although the trendline has a downward track over the final three months of the graph, it ends at a higher level than is currently seen. The answer to the question concerning the direction of travel in house prices in Scotland consequently remains too evenly balanced for a definitive conclusion to be reached.
Transactions analysis
Monthly transaction counts
Figure 2 below shows the monthly transaction count for purchases during the period January 2015 to November 2021, based on RoS (Registers of Scotland) figures for the Date of Entry. (November 2021 figures are based on RoS Application dates.)
The fall in the number of transactions at the onset of the pandemic in March/April 2020 is clearly visible – the March 2020 property sales that actually took place would largely have been agreed prior to the commencement of the first lockdown in Scotland on 24 March 2020. However, what is also clear is the recovery in sales during the summer of 2020, followed by an acceleration from August 2020 to a peak of 13,022 transactions in October 2020 – the highest number in a single month since November 2007.
It can be seen too that sales per month from September 2020 to March 2021 were at higher levels than the previous five years, as the market played ‘catch-up’ with the lost transactions during the spring and early summer months, and also took advantage of the LBTT tax reductions which were on offer from 15 July 2020 to 31 March 2021 (inclusive).
Also noteworthy is the spike in sales in March 2021 – as the tax reduction expiry date approached – as is the fall in sales in April 2021, indicating the extent to which buyers had managed to bring forward their purchases into March 2021 to take advantage of the LBTT tax savings.
Sales volumes from May to November 2021 look roughly on a par with, or slightly ahead of, previous years, perhaps suggesting that the market has now returned to its pre-pandemic transaction levels.
Comparing total sales in 2020 with those of 2019, there was a 14% fall in the overall size of the market. However, looking at the number of transactions for the first eleven months of 2021, and comparing with the same period in 2019 (2020 figures are distorted by the lockdown in the early stages of the pandemic), sales are up by 11%, although this does include the spike in March 2021, which will have enhanced the 2021 totals.
Table 2 shows the number of transactions per month in Scotland which are equal to or greater than £750k. The threshold of £750k has been selected as it is the breakpoint at which the highest rate of LBTT becomes payable.
Table 2 shows that there have been 977 sales in excess of £750k during the first eleven months of 2021, and we anticipate there will be at least 23 additional sales in November 2021, not yet recorded by the Registers of Scotland and hence not included in the above total. Sales of high-value properties to the end of November 2021 will therefore likely reach 1,000 in number by the end of the month and approach 1,100 by the end of the year. Hence annual transactions of £750k or higher in 2021 will likely double those seen in 2018.
The reasons for this dramatic increase in top-end sales in 2021 are, as previously discussed, partly to do with the change in preference for larger properties. Home movers were thus encouraged to look for premises which better suited their updated needs. But additionally, we should mention the record low interest rates, which made the purchase of a top-end property more affordable, as well as the tax savings associated with the LBTT holiday, available up to the end of March 2021. This encouraged the whole market to be more adventurous in its outlook.
However, even with the additional 23 as yet unrecorded sales being taken into account, November 2021 becomes the second month in a row in which the number of homes purchased having a value of £750k or higher will be lower than that recorded in the same month of the previous year.
Annual change
The average house price in Scotland has increased by some £18,000 – or 9.3% – over the last twelve months, to the end of November. This is a reduction from the £21,800 growth seen to the end of October 2021, and is the second month in succession in which the annual rate of house price growth has slowed, having reached an annual rate of 13.1% in September 2021. In November, Scotland’s growth rate trails Wales’ 9.4% by 0.1%, but in percentage terms is still higher than the nine GOR regions in England.
In November 2021, 31 of the 32 local authority areas in Scotland saw their average prices rise over the previous twelve months. The one area with a price fall compared to one year earlier was Na hEileanan Siar – but low transaction counts on the Islands often cause unexpected results due to the volatility in the price of the small number of sales – there were just 25 transactions in Na h-Eileanan Siar in November, compared to over 700 in both Edinburgh and Glasgow.
The area with the highest annual increase in average house prices in November was Argyll and Bute, where average prices have risen by 17.8% over the year and by 4.6% in the month. Statistics for the month include the sale of the Ferry Inn House on the Rosneath Peninsula.
The Ferry Inn House was once owned by Princess Louise, the daughter of Queen Victoria. It sold for just under £1 million. The data for Argyll and Bute in November also includes the sale of a further £1 million detached property on the outskirts of Oban, with 11 bedrooms, 5 bathrooms and 17 acres of land.
With these two properties having been sold in the month, it is little wonder that average prices in the area have seen such rapid escalation.
Monthly change
In November 2021, Scotland’s average house price in the month rose by some £500, or 0.2%, compared to a fall of £70 in October. The average price of a home in Scotland now stands at £213,109, which sets a new record level for the nation for the eighth time in the last twelve months.
In November, 20 Local Authority areas in Scotland experienced rising prices in the month, with only 12 seeing prices decline. The largest increase in average prices in November, of 10.2%, was in the Shetland Islands, followed by the Orkney Islands at 7.0%, but as indicated above, Scotland’s Island groups tend to see volatile price movements, due to the low number of sales each month.
On the mainland, Inverclyde saw the largest increase in prices in the month, of 4.6%. This increase in average price was helped this month by the sale of a modern detached home, overlooking the Firth of Clyde, in Gourock, for £650k.
On a weight-adjusted basis, which takes into account both the increase in average price and the number of transactions involved, six local authority areas in November were responsible for 54% of the positive movement in Scotland’s average house price. These were, in order of influence, South Lanarkshire, Argyll and Bute, Perth and Kinross, Highland, Falkirk and Moray. At the opposite end of the scale three authorities were responsible for 60% of the fall in prices in the month, being the City of Edinburgh, East Renfrewshire and East Lothian, with the overall rise in prices outweighing the falls by £484.
Peak Prices
Each month, in Table 3 above, we highlight in light blue the local authority areas which have reached a new record in their average house prices. In November there are 14 such authorities, up from 12 in October. In October, it was noticeable in Table 3 that four of the top six local authority areas ranked by price had reached new record levels: however, in November almost the opposite applies, with only one of the top six areas by value having established a new record price. Prices in the other five areas all fell in the month, with semi-detached homes in these areas tending to see the largest falls in average values.
Heat Map
The heat map below shows the rate of house price growth for the 12 months ending November 2021. As reported above, all but one of the 32 local authority areas in Scotland are reporting an increase in their housing values over the last year. The one area with negative growth is Na h-Eileanan Siar, where prices over the year have fallen by -4.6%. The highest increase over the twelve months to November 2021 was in Argyll and Bute at 17.8% with near neighbour East Dunbartonshire being in second place at 16.3%.
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