February House Price Index from Walker Fraser Steele
- January’s downturn in prices continues into February
- Prices in 2023 experience the largest fall in fourteen years
- East Renfrewshire is authority with highest average prices
- Sales volumes are low in Jan & Feb – expect higher sales in March
- Average Scottish House price now £220,702, down 0.9% on January, up 3% annually
Table 1. Average House Prices in Scotland for the period February 2022 – February 2023
(The prices are end-month smoothed over a 3 month period)
Note: The Walker Fraser Steele Acadata House Price Index (Scotland) provides the “average of all prices paid for houses”, including those made with cash.
Scott Jack, Regional Development Director at Walker Fraser Steele, comments: “Far from experiencing a storm, the Scottish housing market could be said to be navigating choppy waters.
“This is to be expected as January and February are typically slow months for house sales – in part because of the shorter days and extended holidays over the Christmas period. However, the seasonal lull in activity has been amplified by the rise in mortgage costs as a result of the ill-conceived Truss-Kwarteng mini budget.
“Amazingly, notwithstanding that onslaught, the current average house price still remains some £6,300, or 3.0%, above the average price of twelve months earlier. However, through a monthly lens, our index shows that in February 2023 prices continued their descent, falling by a further £2,000 in the month, on top of the £1,750 price decrease in January.
“If we take account of both the change in prices and the number of transactions involved – Edinburgh (17%); Aberdeenshire (9%); South Lanarkshire (9%); North Lanarkshire (7%); East Renfrewshire (6%); and Clackmannanshire (6%) in February accounted for 54% of the £6,300 increase in Scotland’s average house price over the year.
“Of note in Scotland is that many estate agents have noticed an increase in the number of rental properties coming to market. Landlords raised their concerns about the legislation in response to the cost-of-living crisis some time ago. This legislation has followed a sustained period of increased letting agent regulation, higher taxes for landlords and tight rent controls to protect tenants.
“As we emerge from February, we will watch transaction volumes carefully. In each of the last eight years, March transaction totals have always exceeded those of February. We should expect higher sales volumes in next month’s data.”
Commentary: John Tindale, Acadata Senior Housing Analyst
The February housing market
February 2023 continued the downward trend in average prices seen in January, with prices falling by a further £2,000 in the month, on top of the £1,750 price decrease in January. Prices in 2023 to the end of February have therefore dropped by £3,750. Ignoring the price movements associated with the introduction of the LBTT tax in April 2015 and the termination of the LBTT tax-holiday in April 2021, these price reductions represent the largest falls over two months since February/March 2009, some fourteen years ago.
During February 2023, it was the price of flats that again fell the most, down by -1.8% in the month.
So why the price falls? As discussed last month, January and February are typically the weakest months of the year in Scotland’s housing market in terms of transaction levels, which is in part to do with Christmas, when many estate agents remain closed over the holiday period.
When sales levels are low, minor trends – which might otherwise have been obscured by the larger number of sales in the other months of the year – can stand out. For example, estate agents have been reporting that the number of sales of properties which have previously been in the rental market are becoming more noticeable, with the government rent cap and future regulation changes deterring investors in this sector.
Even a small exodus of private investors in buy-to-let properties will have an impact on prices in the winter months. In Edinburgh, for example, the price of an average flat fell from £286k in December 2022 to £275k in February 2023, while in Glasgow average flat prices fell from £180k to £169k over the same period – with these two cities accounting for 38% of Scotland’s flat sales in February.
Despite reporting the largest monthly fall in prices of the last fourteen years, the current average house price still remains some £6,300, or 3.0%, above the average price of twelve months earlier.
Indeed, as can be seen from Figure 1 below, taking a view of price movements in Scotland over the last five years, the dip in prices in January and February 2023 is barely perceptible. The average house price in February 2018 was £178,175 compared to £220,702 in February 2023 – a £42,500, or 24% rise over the period – about which the adage that past performance is no guarantee of future performance is pertinent.
Figure 1. The average house price in Scotland over the five year period February 2018 to February 2023
Local Authority Analysis
Table 2. Average House Prices in Scotland, by local authority area, comparing February 2022, January 2023 and February 202
Table 2 above shows the average house price and percentage change (over the last month and year) by Local Authority Area for February 2022, as well as for January and February 2023, calculated on a seasonal- and mix-adjusted basis. The ranking in Table 2 is based on the local authority area’s average house price for February 2023. Local Authority areas shaded in blue experienced record average house prices in February 2023.
Annual change
The average house price in Scotland in February 2023 has increased by some £6,300 – or 3.0% – over the last twelve months. This annual rate of growth has decreased by -1.6% from January’s 4.6%, which is a slightly smaller fall than the -1.9% reduction seen in January.
However, in February 2023, 23 of the 32 local authority areas in Scotland were still seeing their average prices rise above the levels of twelve months earlier, three fewer than in January. The nine areas where values fell over the year were, in descending order (with newcomers this month marked by an asterisk):- Inverclyde* (-8.7%), Orkney Islands* (-3.0%); Fife (-2.9%), Aberdeen City (-2.1%), Na hEileanan Siar (-2.0%), Glasgow City* (-1.2%), Angus* (-1.2%), Scottish Borders (-0.4%) and Dundee City (-0.2%).
The area with the highest annual increase in average house prices in both January and February 2023 was Clackmannanshire, up by 25.0% and 29.3% respectively over the two months. However, there were only 27 transactions in Clackmannanshire in February 2023, with a small number of transactions frequently being associated with volatile movements in average prices.
On a weight-adjusted basis – which incorporates both the change in prices and the number of transactions involved – there were six local authority areas in February which accounted for 54% of the £6,300 increase in Scotland’s average house price over the year. The six areas in descending order of influence are: – Edinburgh (17%); Aberdeenshire (9%); South Lanarkshire (9%); North Lanarkshire (7%); East Renfrewshire (6%); and Clackmannanshire (6%).
Monthly change
In February 2023, Scotland’s average house price fell in the month by some -£2,000, or -0.9%. This is the largest fall in a single month since March 2009, some fourteen years ago, ignoring the rather artificial falls around the months relating to the introduction of the LBTT in April 2015, as well as the ending of the LBTT tax-holidays in April 2021.
In February 2023, Scotland’s average house price fell in the month by some -£2,000, or -0.9%. This is the largest fall in a single month since March 2009, some fourteen years ago, ignoring the rather artificial falls around the months relating to the introduction of the LBTT in April 2015, as well as the ending of the LBTT tax-holidays in April 2021.
On a weight-adjusted basis, there were four local authority areas in February which accounted for 51% of the -£2,000 decrease in Scotland’s average house price in the month. The four areas in descending order of influence are: – Glasgow (-18%); Edinburgh (-16%); Fife (-9%); and East Lothian (-8%). It is not surprising to find Glasgow and Edinburgh in this listing, given the fall in flat prices, as they are the two authorities with the highest percentage of flats being sold each month, at 67% and 63% of their respective transaction totals.
On a similar theme, Fife has the highest proportion of terraced sales of all the 32 local authorities in Scotland, at 27% – terraced properties also being popular among buy-to-let investors, who may have decided it is time to sell.
The highest increase in average prices in the month was in East Renfrewshire, where – with two detached properties selling for £1 million plus in Newton Mearns, one being a new-build on the Southfield Grange Development – the average price of detached properties in the area rose by £22k in the month.
Overall, in February, the average price in East Renfrewshire increased by 7.7%, causing Edinburgh with its downward movement in prices, to fall into second place in terms of having the highest-valued average house price in Scotland.
Peak Prices
Each month, in Table 2 above, the local authority areas which have reached a new record in their average house prices are highlighted in light blue. In February, there are 5 such authorities, up by one from 4 in January.
Scotland transactions of £750k or higher
Table 3. The number of transactions by month in Scotland greater than or equal to £750k, January 2015 – February 2023
Table 3 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.
There were 37 such transactions recorded by RoS relating to February 2023. Currently, this is the fourth-highest February total recorded to date, but there is likely to be an increase to this figure next month, as RoS process additional sales.
According to the RoS data, the highest priced property sold in Scotland in February 2023 was a £1.6 million terraced property in Edinburgh. This contrasts with three properties sold in January at £3 million plus. Although the number of such sales is small, especially in the winter months, it is perhaps an early indication of a slight slowing in sales at the top-end of the market.
Transactions analysis
Figure 2 below shows the monthly transaction count for purchases during the period from January 2015 to January 2023, based on RoS (Registers of Scotland) figures for the Date of Entry.
The chart shows how transactions tend to dip in February from the January totals, which in turn are lower than the totals for the year’s preceding December. In six of the eight years displayed, the February sales total is the lowest of the year. The two occasions when this was not the case was in February 2020 and February 2021.
In February 2020 the Covid pandemic had yet to be identified, with the first lockdown beginning on 23rd March 2020, Phase 1 being introduced on 29th March 2020 and Phase 2 introduced on 19th June 2020. This resulted in an almost total lack of sales in April 2020 – a position clearly visible on the graph.
In 2021 the end of the LBTT tax-holiday was planned, and indeed, did end on 31st March. Consequently, sales of properties were higher than average in the final two months of the scheme – the brown line showing a peak in sales in March 2021. Sales did however slump in April 2021, as the tax-holiday came to an end. April was therefore the month with the lowest level of sales in 2021.
A close study of the eight years displayed in Figure 2 also reveals that each December is followed by a reduction in transactions in the following January, without exception.
Figure 2. The number of sales per month recorded by RoS based on entry date from 2015 – 2023
What we can also learn from Figure 2 is that one of the three months of June, July and August have seen the highest sales of the year in 4 of the 8 years displayed. Finally, in each of the eight years, March transaction totals have always exceeded those of February. One can therefore look forward to higher sales volumes with next month’s data
Heat Map
The heat map below shows the rate of house price growth for the 12 months ending February 2023. As reported above, 23 of the 32 local authority areas in Scotland have seen a rise in their average property values over the last year, the nine exceptions being :- Inverclyde, Orkney Islands, Fife, Aberdeen City, Na h-Eileanan Siar, Glasgow City, Angus, Scottish Borders and Dundee City.
The highest increase on the mainland over the twelve months to February 2023 was in Clackmannanshire at 29.3%, although this was based on a relatively small number of sales. In second place on the mainland was Moray at 14.3%. 4 of the 32 local authority areas had price growth of 10.0% or higher – one fewer than in January 2023.
Comparisons with Scotland
Figure 3. Scotland house prices, compared with England and Wales, North East and North West for the period January 2005-February 2023
Figure 4. A comparison of the annual change in house prices in Scotland, England and Wales, North East and North West for the period January 2020–February 2023
Scotland’s Eight Cities
Figure 5. Average house prices for Scotland’s eight cities from December 2021–February 2023
Figure 6. Average house prices for Scotland’s eight cities February 2023
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