Scotland’s average house price decreased in August

August House Price Index from Walker Fraser Steele:

Scotland’s average house price decreased in August by £225

• But 31 Local Authorities have seen prices rise over the year
• Shetland Islands have highest annual growth rate at 19.6%
• Larger number of high-value sales in 2022 than 2021
• Average house price £224,117, down 0.1% on July, 7.6% up annually

Table 1. Average House Prices in Scotland for the period August 2021 – August 2022

Scott Jack, Regional Development Director at Walker Fraser Steele, comments: “The average price paid for a house in Scotland in August 2022 was £224,117 – a slight decrease of 0.1%, from the price established in July.

“It is only significant in so far that it is the first decrease in Scotland’s monthly average house price since June 2021, but it is important to remember that on an annual basis, the price is some £15,900, or 7.6%, higher than it was in August 2021.

“One reason for the continued resilience is the number of sales recorded over £750k. Our data shows that some 82 sales were recorded at values over £750k during August 2022. We think this figure will increase as further sales for the month are processed by the Registers of Scotland.

“What this number of sales over £750k tells us is that “working from home” and the “race for space” continue to be important features of the current housing market, even if the prominence of the Covid restrictions are beginning to wane.

“Properties of this nature command more space to accommodate new ways of living but remain in short supply which again supports the average house price – even in the face of some meaningful economic headwinds thanks to global inflationary pressures.

“How resilient prices are over the coming months remains to be seen. Certainly, some of the recent domestically inspired spikes to mortgage affordability may yet dampen buyer enthusiasm, but today’s interventions from the new Chancellor are designed to stabilise the cost of borrowing – and there remains a shortage of desirable property.”

Commentary: John Tindale, Acadata Senior Housing Analyst

The August housing market

The average price paid for a house in Scotland in August 2022 was £224,117. This represents a marginal fall of £224, or -0.1%, from the price established in July, the first fall in Scotland’s monthly average house price since June 2021.

Although the average price fell in the month, on an annual basis the price is some £15,900, or 7.6%, higher than it was in August 2021. This annual rate has slowed from the 10.6% growth seen in June, but that month was assisted by a near £3,000 fall in prices which occurred twelve months earlier in June 2021, meaning that the base point for measuring June’s growth rate had started from a particularly low level.

As Figure 1 below shows, since the start of this year the average house price growth in Scotland has been oscillating on a bi-monthly basis, so the fall in the August rate was not unexpected.

Figure 1. The monthly rate of house price growth in Scotland over the period August 2021 to August 2022

As shown in Table 2 sales of high-value properties in the first eight months of the year are at an all-time high, with no indications that the pace of such sales is diminishing. This would suggest that the post-Covid lifestyle changes associated with “working from home” and a “race for space” remain as motivation for would be home-movers, with competition for the right property continuing to keep prices high.

The commentary in this release relates to the August housing market in Scotland. This does of course pre-date the somewhat remarkable events of September and October, with a Mini-Budget having been delivered on 23rd September and a new Chancellor being installed on 13th October.

As noted in this release, the housing market has shown considerable resilience over recent months, in spite of predictions otherwise. Although interest rates have been edging up, it is clear there is still considerable buying power and appetite in the market. Our task will be to report on what happens to completion prices based on cash and mortgaged transactions across Scotland. There will be much on which to reflect.

Transactions analysis

Figure 2 below shows the monthly transaction count for purchases during the period January 2015 to August 2022, based on RoS (Registers of Scotland) figures for the Date of Entry (August 2022 totals are based on RoS Application dates).

The effect of the Covid pandemic – which started in March 2020 – can be clearly seen from the graph. Housing transactions in April 2020 plummeted with the arrival of the pandemic, to be followed by a slow rise in sales as confidence began to return. Then followed a period when sales exceeded previous levels, from September 2020 to March 2021, as lifestyle changes and the LBTT tax-holiday pushed up demand – especially for properties with space to allow for working from home.

The March 2021 peak is also clearly visible, which coincided with the last month of the LBTT tax-holiday. The final month typically creates a peak in transactions, as purchasers rush to take advantage of the tax-holiday before the end of the month, after which time the tax savings come to an abrupt halt.

Sales from June 2021 onward also tended to be higher than during the previous five years (2015 – 2019), as demand for larger properties with space and potential holiday lets continued to stimulate the market. It is only from the start of 2022 that demand appears to have weakened marginally, with sales from March 2022 to July 2022 no longer exceeding those of the previous years, although Table 2 on the next page indicates that the demand for properties priced in excess of £750k continues to be strong.

In the graph below, the August 2022 total shows a small increase in transactions compared to July 2022, but the figure for the month remains an estimate, so at this stage not too much weight should be given to the predicted rise in sales.

RICS (Royal Institution of Chartered Surveyors), in its August 2022 Residential Market Survey, is continuing to point to an easing in sales market activity, with metrics on demand and sales remaining in negative territory over the month. RICS do however add that that the current level of market appraisals being undertaken is similar to that seen twelve months ago, suggesting the tight supply backdrop is unlikely to change dramatically in the near future – this remains consistent with a still reasonably solid degree of upward movement in house prices for the time being.

Figure 2. The number of sales per month recorded by RoS based on entry date (RoS applications date for August 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 – August 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 82 sales in excess of £750k during August 2022, and we anticipate that this total will increase by another twenty-plus in number, as further sales for the month are processed by the Registers of Scotland. If this proves to be the case, then six of the eight months in 2022 will have seen a higher number of sales in excess of £750k than in 2021, which was itself ahead of all previous years. Certainly, looking at the first eight months of 2021, for comparative purposes, there were 692 sales above £750k, which have been exceeded by the 710 sales seen in 2022.

These statistics suggest that the “lifestyle changes” associated with the pandemic, of “working from home” and the “race for space”, continue to be important features of the current housing market, even if the prominence of the Covid restrictions are beginning to wane.

The five authorities with the largest number of the 710 high-value sales that have been recorded to date in 2022 are: Edinburgh (360); Glasgow City (46); Fife (39); East Lothian (36); and finally East Renfrewshire (24). From these figures it can be seen that in 2022, Edinburgh accounts for just over half of this sector of the housing market.

Local Authority Analysis

Table 3. Average House Prices in Scotland, by local authority area, comparing August 2021, July and August 2022

Table 3 above shows the average house price and percentage change (over the last month and year) by Local Authority Area for August 2021, as well as for July and August 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 August 2022. Local Authority areas shaded in blue experienced record average house prices in August 2022.

Annual change

The average house price in Scotland increased by some £15,900 – or 7.6% – over the last twelve months, to the end of August. This is a near £3,100 decrease over the £19,000 growth in prices seen in the twelve months to the end of July 2022 – and represents the second month in a row in which the increase in prices on an annual basis has slowed.

In August 2022, 31 of the 32 local authority areas in Scotland saw their average prices rise over the levels seen twelve months earlier, the same number as in July. The one area that saw values fall over the year was East Lothian, where prices have dropped by 1.9%. In East Lothian, it is the average price of detached properties that have fallen the most over the past year, from an average £520k in August 2021 to £490k in August 2022.

The area with the highest annual increase in average house prices in August 2022 was the Shetland Islands, where values have risen by 19.6% over the year. However, as regular readers of our reports will know, the Islands frequently have the largest movement in average house prices due to the small number of transactions that take place each month, with just 21 sales in August. On the mainland, the authority with the highest increase over the year was – for the fifth month in succession – Argyll and Bute, at 17.1%. Interestingly, in August, it was “Flats” that saw the largest increase in average prices in Argyll and Bute, assisted by the purchase of a ground floor conversion of a Victorian villa in Helensburgh for £560k.

On a weight-adjusted basis, which incorporates both the change in prices and the number of transactions involved, there are six local authority areas in August that accounted for 49% of the £15,900 increase in Scotland’s average house price over the year. The six areas in descending order of influence are: – Glasgow (11%); Edinburgh (11%); South Lanarkshire (10%); Highland (7%); Fife (5%); and West Lothian (5%).

Monthly change

In August 2022, Scotland’s average house price in the month fell by some £225, or -0.1%. This is the first fall in the average house price in a month since June 2021.

In August 2022, 20 of the 32 Local Authority areas in Scotland experienced rising prices in the month, the same number as in July. The largest increase in average prices in August was seen, for the second successive month, in Inverclyde, up by 7.0%. Last month we reported that prices in July in Inverclyde had been assisted by the purchase of an upmarket flat in Greenock. This was a lower-floor conversion of a traditional 5-bedrom 1870 Victorian blonde sandstone property, which sold for £370k. In August, it transpires that a further upper-floor conversion was sold in the same street for £410k, which helped secure Inverclyde’s position as having the highest increase in average prices in the month.

At the other end of the scale, the lowest increase in average prices in August was in Stirling, at -4.9%. The third-highest priced sale of the year in Stirling had been included in the statistics for last month – a detached home in Croftamie, a village located some 25 miles to the north of Glasgow, which sold for £1.4 million. But, having dropped out of the statistics this month and with no similar property taking its place, average prices in Stirling in August dropped accordingly.

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 August there are 7 such authorities, down from the 11 seen in July. With average prices in Scotland falling in August we should advise that Scotland itself is no longer at a record price, the first time this has happened this year.

Heat Map

The heat map below shows the rate of house price growth for the 12 months ending August 2022. As reported above, 31 of the 32 local authority areas in Scotland have seen a rise in their average property values over the last year, the one exception being East Lothian. The highest increase on the mainland over the twelve months to August 2022 was in Argyll and Bute at 17.1%. 14 of the 32 local authority areas had price growth in excess of 10.0% – two less than in July 2022.

Comparisons with Scotland

Figure 3. Scotland house prices, compared with England and Wales, Wales, North East and North West for the period January 2005-August 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–August 2022

Scotland’s Eight Cities

Figure 5. Average house prices for Scotland’s eight cities from June 2021–August 2022

Figure 6. Average house prices for Scotland’s eight cities August 2022