- Shortage of housing stock continues to support prices
- Scotland’s monthly rate of 1.5% is highest since August
- Private annual rental growth is at highest rate since records began, encouraging buy-to-let investment
- Average Scottish House price in February 2022 is £218,702, a monthly increase of 1.5% & annual increase of 8.2%
Heat Map
Table 1. Average House Prices in Scotland for the period February 2021 – February 2022
Scott Jack, Regional Development Director at Walker Fraser Steele, comments: “Scotland continues to see record average house price growth with the average price paid for a house in February this year reaching £218,702 – a price £16,600 higher than at the same time last year. It continues the trend from January and, on a monthly basis, this means prices in February rose by 1.5% – the highest increase in a month since August last year.
“As a piece of context, in February this year, all the regions in England and Wales established new record average house price levels, but it is fair to say that the Scottish property market has robustly withstood one of the most seismic events in living memory in the past couple of years.
“The reasons for this strong performance remain constant across the UK. We are still seeing the results of people choosing to change the way in which they work and where they choose to do this. While inflation and interest rates are rising (albeit it at different paces), we still enjoy relatively low borrowing costs. The supply of desirable property remains constrained so there is a lot of competition for the most desirable property.
“It seems that the pandemic’s impact on our ability to spend, which includes disposable income for socialising and holidays, has meant people have saved for more fundamental things such as a house purchase. Also, the rise in house prices during the period means that existing homeowners have benefitted from an increase in the equity in their homes meaning they can move up the ladder.”
Commentary: John Tindale, Acadata Senior Housing Analyst
The February housing market
The average price paid for a house in Scotland in February 2022 was £218,702, which sets a record price for the country – this is the seventh occasion that this has happened in the last twelve months.
This price is some £16,600 higher than that seen in February 2021, indicating that prices have risen by 8.2% on an annual basis. This rate is also some 1.1% up on the 7.1% recorded in December 2021, with both January and February of 2022 having witnessed an increase in house prices.
On a monthly basis, prices in February 2022 rose by 1.5%, or around £3,200. This is the highest increase in a month since August 2021.
Figure 1. The average house price in Scotland over the period February 2020 to February 2022 with trendline
Scotland is not alone in seeing house prices continuing to rise. In February 2022, all nine GOR regions in England and Wales established new record average house price levels, although only Wales had an annual growth rate higher than that of Scotland, at 8.9%.
So what is causing this ongoing upward movement in prices, particularly at a time when many commentators had been expecting to see a slowing in the growth rate, as increased cost of living pressures begin to bear down on consumers?
As we reported last month, in general terms we are still living with the effects of the pandemic, and the “lifestyle” changes this has brought about – in particular the “Work from Home” edict has encouraged many to move to larger premises with outdoor facilities – the so-called “Race for Space”.
There is still high demand for such homes, but supply is limited, so there continues to be strong competition for the properties that do come onto the market, with resultant price increases.
Additionally, the ONS advises that private rental prices in Scotland have grown by 2.6% in the 12 months to February 2022, which is the highest annual growth rate for Scotland since records began in 2012.
If this figure looks low, we should point out that the ONS private rental index not only measures the change in newly advertised rental prices, but also reflects price changes for all existing private rental properties.
This increase in rental growth rates is encouraging some investors to consider purchasing buy-to-let properties, adding to the already buoyant demand for homes that currently exists.
Transactions analysis
Monthly transaction counts
Figure 2 below shows the monthly transaction count for purchases during the period January 2015 to February 2022, based on RoS (Registers of Scotland) figures for the Date of Entry. (February 2022 figures are based on RoS Application dates.)
The graph shows that of the eight years on display, all – bar 2020 and 2022 – have February as being the month with the lowest transaction count of the year.
This in part is a knock-on effect from the Christmas holidays, when estate agents are often closed from Christmas Eve to the New Year – with the Date of Entry on completion of the sale often taking five to six weeks from the date at which the property was first put on the market.
In part, it is also due to the reduced daylight hours at the turn of the year, which restricts would-be buyers from visiting prospective properties.
If we remove the pandemic-related years 2020 – 2022 from our calculations, then the average number of sales in February for the seven years 2013 – 2019 amounts to 5,340 transactions, compared to August, which has the maximum number of sales of any month at an average 9,368 transactions – a 75% increase on February.
Our monthly statistics also show that there is a seasonal variation in the prices being paid across the year, with February typically seeing a 2.5% reduction in the average price paid, and the highest prices typically being achieved in September/October when prices are some 2.0% higher than average.
Allowing for the five-to-six weeks’ time span from putting a home up for sale to the Date of Entry, this will mean that generally the lowest prices are accepted for a property in December / January, and the highest prices are often achieved in August / September. In our house price calculations, we adjust the data to take these known seasonal variations into account.
Figure 2. The number of sales per month recorded by RoS based on entry date (RoS applications date for February 2022), for the period 2015 – 2022. (Source: Registers of Scotland.)
Scotland transactions of £750k or higher
Table 2. The number of transactions by month in Scotland greater than or equal to £750k, January 2015 – February 2022
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 were 39 sales in excess of £750k during February 2022, and we anticipate that this number will increase as further sales for the month are processed by the Registers of Scotland. However, as discussed earlier, February typically has the lowest number of property sales in the year, so there should not be too much concern about the relatively low number of high-value sales that occurred in the month.
The seven authorities with the largest number of the 119 high-value sales that have been recorded to date in 2022 are: Edinburgh (59); Glasgow City (11); Fife (8); East Lothian (5); East Dunbartonshire (4); East Renfrewshire (4); and finally Perth and Kinross (4).
The 59 high-value sales in Edinburgh amount to 4.6% of the total 1,292 sales that have been recorded in the capital in 2022 to date. This compares to a figure of 1.1% to the end of February – which the 119 high-value sales represent – when compared to Scotland’s total number of 11,041 transactions recorded by the Registrar.
The high-value ratios for the remainder of the seven authorities listed above are – East Lothian 2.6%; East Dunbartonshire 2.4%; East Renfrewshire 2.1%; Perth and Kinross 1.3%; Fife 1.1%; and finally, Glasgow City 0.9%.
Local Authority Analysis
Table 3. Average House Prices in Scotland, by local authority area, comparing February 2021, January 2022 and February 2022
Table 3 above shows the average house price and percentage change (over the last month and year) by Local Authority Area for February 2021, as well as for January and February 2022, calculated on a seasonal- and mix-adjusted basis.
The ranking in Table 3 is based on the local authority area’s average house price for February 2022. Local Authority areas shaded in blue experienced record average house prices in February 2022.
Annual change
The average house price in Scotland has increased by some £16,600 – or 8.2% – over the last twelve months, to the end of February. This is a £1,300 increase over the revised £15,300 growth in prices seen to the end of January 2022, and represents approximately half of the annual average gross pay of those working in Scotland in 2020/2021.
In February 2022, 30 of the 32 local authority areas in Scotland saw their average prices rise over the previous twelve months. The two areas with price falls compared to one year earlier were Clackmannanshire and Aberdeen City.
In Clackmannanshire all property types, excepting terraces, saw a fall in their average values, but the authority has the lowest number of property sales per month of all the Local Authorities on the mainland, which tends to produce volatile movements in the average price, especially when measured in percentage terms.
In Aberdeen City, it is the average price of terraces and flats that have seen a fall over the last twelve months. However, in Aberdeen, there is a strong correlation between house prices and the price of crude oil, and as suggested last month, we anticipate that property values will begin to increase relatively soon, following the recent dramatic rise in oil prices.
The area with the highest annual increase in average house prices in February 2022 was the Orkney Islands, where values have risen by 28.6% over the year: however, like Clackmannanshire this statistic is based on a low volume of sales (13 transactions in the Orkney Islands in February 2022).
On the mainland, the highest rise in prices occurred in Inverclyde, up by 16.5% over the year, this statistic having been assisted by the February purchase of the second-highest priced home in Inverclyde of the last twelve months.
The property concerned is a five-bedroom detached home in Kilmacolm, located approximately 15 miles to the west of Glasgow, which sold for £1.45 million.
Monthly change
In February 2022, Scotland’s average house price in the month rose by some £3,200, or 1.5%, which is the highest increase of the last six months. The average price of a home in Scotland now stands at £218,702, which sets a new record level for the nation for the seventh time in the last twelve months.
In February 2022, 21 Local Authority areas in Scotland experienced rising prices in the month, the same number as one month earlier.
The largest increase in average prices in February, of 9.3%, occurred in East Renfrewshire. The price of all property types, except for flats, increased in East Renfrewshire in February, with the highest increase occurring in detached properties, up from an average £425k in January to an average £495k one month later.
These dramatic changes in price are frequently seen in February, due to the low overall level of sales in the month. In this instance, the average price for East Renfrewshire has been elevated by the purchase of the area’s most expensive detached property of the last twelve months for £1.95 million.
The property, which is located in Giffnock, is some 6 miles to the south of Glasgow centre and is less than half a mile from Whitecraigs railway station, with a direct service into Glasgow Central station, having a journey time of approximately 20 minutes. Giffnock is frequently referred to as being amongst the most affluent areas in Scotland.
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 February there are 18 such authorities, three more than in January. We can also add that Scotland itself has set a record average price in February 2022 – the second of the year.
Heat Map
The heat map below shows the rate of house price growth for the 12 months ending February 2022. As reported above, all but two of the 32 local authority areas in Scotland are reporting an increase in their house values over the last year. The two areas with negative growth are Clackmannanshire and Aberdeen City, where prices over the year have fallen by -2.8% and -0.9% respectively. The highest increase over the twelve months to February 2022 was in the Orkney Islands at 28.6%, followed by Inverclyde at 16.5%.
Comparisons with Scotland
Figure 3. Scotland house prices, compared with England and Wales, Wales, North East and North West for the period January 2005-February 2022
Figure 4. A comparison of the annual change in house prices in Scotland, England and Wales, Wales, North East and North West for the period January 2005–February 2022
Scotland’s Seven Cities
Figure 5. Average house prices for Scotland’s seven cities from December 2020–February 2022
Figure 6. Average house prices for Scotland’s seven cities February 2022
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