Tag: house prices

Walker Fraser Steele: Scottish House Price growth picks up in January

  • Scotland’s monthly rate of 1.2% is highest since August
  • Fife sees £4 million sale
  • Shortage of housing stock continues to support prices
  • Average Scottish house price now at £215,388, monthly rise of 1.2%, 7.6% up annually

Scott Jack, Regional Development Director at Walker Fraser Steele, comments:

“Our report this month shows that the average house price in Scotland has increased by some £15,200 – or 7.6% – over the last twelve months, to the end of January this year. This is an £800 increase over the revised £14,400 growth in prices we witnessed to the end of December last year. Of equal significance is the fact that this heralds a reverse to the slide in the annual rate which had started over the previous three months. While the growth rate here in Scotland trails that of Wales by 1.4%, it is still higher than the average 7.3% in England and Wales overall. The Scottish market is continuing to perform well.

“What we are seeing in this return to growth is that people are still living, moving, buying and selling in the aftermath of the pandemic and the “lifestyle” changes it brought about. Working from Home has encouraged many homebuyers to move to larger premises which can accommodate a different way of living and working. Many have been in search of more outdoor space too – the so-called “Race for Space”. The issue here is that while there is a high demand for such homes, the supply is limited, so there continues to be strong competition for the properties that do come onto the market, with robust price increases as a result.”

Commentary: John Tindale, Acadata Senior Housing Analyst

The January housing market In January 2022, the annual rate of house price growth increased to 7.6%, from 7.3% in December 2021. This represents an increase of £15,200 over the average price of a property at the end of January 2021. The increase in the growth rate brings about a halt to the downturn in rates observed over the previous three months.

Over the last 12 months, there are six Local Authority Areas which between them have accounted for just under 50% of the £15,200 increase in the average price, on a weight-adjusted basis. (A weight adjusted basis takes into account both the change in the authority’s own average price as well as the number of sales involved.) The six areas are – in order of prominence – Fife, the City of Edinburgh, Glasgow City, South Lanarkshire, Highland and West Lothian.

On a monthly basis, prices in January 2022 rose by 1.2%, or £2,572, with Scotland’s average house price now standing at £215,388. This is the highest increase in a month since August 2021, and sets a further record average price for Scotland – providing an additional indication of the general upward pressure on prices.

Figure 1. The annual rate of house price growth in Scotland over the period January 2020 to January 2022 with trendline

So what is causing the ongoing upward movement in prices? 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 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.

Last month we showed that the highest rise in property prices over the last ten years had taken place during the pandemic, with the Lothians being the top three authorities in terms of price growth. We suggested this was due to many purchasers looking for a home with plenty of space outside of Edinburgh city centre, but still remaining within reasonable commuting distance of the capital.

Transactions analysis

Monthly transaction counts

Figure 2 below shows the monthly transaction count for purchases during the period January 2015 to January 2022, based on RoS (Registers of Scotland) figures for the Date of Entry. (January 2022 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 13,055 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 transactions lost during the spring and early summer months. It also benefitted from the LBTT tax reductions available from 15 July 2020 to 31 March 2021 (inclusive).

Noteworthy as well 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 December 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 13% fall in the overall size of the market. However, looking at the total number of transactions in 2021 and comparing them to 2019 (2020 figures are distorted by the lockdown in the early stages of the pandemic), sales are up by 10%. 2021 had the highest number of transactions in a year since 2007

Figure 2. The number of sales per month recorded by RoS based on entry date (RoS applications date for January 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 – January 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 54 sales in excess of £750k during January 2022, and we anticipate that this number will increase as further sales for the month are processed by the Registers of Scotland.

In 2021, total sales in excess of, or equal to, £750k amounted to 1,097 in number – and we expect this total to reach 1,100 as RoS continues to process late registrations for the year. This is the largest number of high-value sales that we have recorded in a year.

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. During the pandemic the nation was instructed to “work from home”, which established an appetite for larger properties with areas which could be used as offices and ideally with outdoor facilities – the “race for space”. Home movers and office workers were thus encouraged to look for premises which better suited their updated needs.

The process of moving home was additionally assisted by the existence of 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, which encouraged the whole market to be more adventurous in its outlook.

However, the peak of the “pandemic market” appears to have occurred in September 2021 (see Figures 1 and 2). As a result, it can be seen that in each month subsequent to that date, the number of homes purchased with a value of £750k or above, has been less than that recorded in the same month of the previous year.

Local Authority Analysis

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

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

Annual change

The average house price in Scotland has increased by some £15,200 – or 7.6% – over the last twelve months, to the end of January. This is an £800 increase over the revised £14,400 growth in prices seen to the end of December 2021, but importantly stops the slide in the annual rate which had been evident over the previous three months. Scotland’s growth rate now trails the Wales rate of 9.0% by 1.4%, but in percentage terms is still higher than the average 7.3% in England and Wales overall.

In January 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 East Renfrewshire and Aberdeen City. In East Renfrewshire, prices of detached homes have fallen from an average £440k in January 2021 to £415k in January 2022. Part of this reduction in the average price of detached homes in East Renfrewshire was due to a fall in the number of homes that sold for more than £750k – there were five such properties purchased in January 2021, but none in January 2022. As we reported last month, this is symptomatic of a general reduction in the purchase of high-value homes in Scotland during the final quarter of 2021, which is now extending into the first month of 2022.

In Aberdeen City the average price of flats has fallen by £5k over the last twelve months. However, in Aberdeen, there is a strong correlation between house prices and the price of crude oil, so we anticipate that property values will begin to increase following the recent dramatic rise in oil prices.

The area with the highest annual increase in average house prices in January 2022 was the Orkney Islands, where values have risen by 19.6% over the year. On the mainland, the highest rise in prices occurred in Fife, where average prices rose by 14.8%. Sales in the month included a magnificent apartment in the Hamilton Grand, overlooking the final hole of the Old St Andrews Golf Course, which changed hands for a reported £4 million. If you are an avid golf fan there is probably no better place in the world to live.

Monthly change

In January 2022, Scotland’s average house price in the month rose by some £2,500, or 1.2%, which is the highest increase of the last five months. The average price of a home in Scotland now stands at £215,388, which sets a new record level for the nation for the eighth time in the last twelve months.

In January, 21 Local Authority areas in Scotland experienced rising prices in the month, compared to 19 in December. The largest increase in average prices in January, of 5.6%, was in Na h-Eileanan Siar. However, as often stated on these pages, Scotland’s Island groups tend to see volatile price movements, due to the low number of sales that take place each month (in this case 18).

On the mainland, West Lothian saw the largest increase in prices in the month, of 4.4%. All property types saw an increase in prices in West Lothian, with the largest contribution to the increase coming from detached homes. The increase in the average price of detached homes was helped this month by the purchase of a resplendent four-bedroom property for £835k, located in Westfield, Bathgate, some fifteen miles to the west of Edinburgh. As mentioned earlier, the Lothians tick all the boxes in terms of ‘pandemic living’, with plenty of space, large properties and a relatively easy commute, if required, into Edinburgh.

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 January there are 15 such authorities, one more than in December. We can also add that Scotland itself has set a new record average price in January 2022 – the first of the year.

Heat Map

The heat map below shows the rate of house price growth for the 12 months ending January 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 East Renfrewshire and Aberdeen City, where prices over the year have fallen by -2.5% and -1.4% respectively. The highest increase over the twelve months to January 2022 was in the Orkney Islands at 19.6%, followed by the Shetland Islands at 16.6% – on the mainland it was Fife that was top with price growth of 14.8%.

Comparisons with Scotland

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

Scotland’s Seven Cities

Figure 5. Average house prices for Scotland’s seven cities from November 2020–January 202

Figure 6. Average house prices for Scotland’s seven cities January 2022

ENDS

Scotland’s October House Price Index from Walker Fraser Steele

Headlines:

  • Average house price in Scotland up by 11.4% over last 12 months
  • Monthly growth rates starting to soften
  • 31 of 32 Local Authorities have rising average prices over year to end October
  • Scotland again outperforming England, Wales & NI
  • £750k+ house sales double that of Jan – Oct 2020

Alan Penman, Business Development Manager at Walker Fraser Steele, comments: “The continued story of Scotland’s successful year for higher priced properties continues.

“The average house price in Scotland has increased by some £21,800 over the last 12 months but our data shows there have been 872 sales over £750k (the point at which the highest rate of Land and Buildings Transaction Tax (LBTT) is applied) during the first ten months of 2021.

“We expect up to 30 additional sales in October 2021, not yet recorded by the Registers of Scotland and so not included in the above total. This would mean sales of these higher-value properties to the end of October 2021 would likely be double in number to those of the first ten months of 2020.

“What we are seeing is the impact of the cut in LBTT earlier in the year, the continuation of low interest rates and cheaper mortgage finance, and the desire of many purchasers during the pandemic to buy bigger properties in the race for space. These factors have meant higher-end properties have played a significant part in the overall growth figure.

“Sales volumes from May to October 2021 are only slightly ahead of previous years, and suggest that the market has now returned to pre-pandemic transaction levels. Nevertheless, the continuing strong performance in October means Scotland had the highest annual rate of house price growth of the four home nations with annual growth at 11.4%, followed by Northern Ireland at 10% (Ulster University Index), Wales at 9.6% and England, without Wales, at 3.9%.”

Commentary: John Tindale, Acadata Senior Housing Analyst

The October housing market:

Scotland’s October housing market is starting to show some signs of slowing in terms of price growth, but it’s necessary to look quite hard for the evidence. We provide four possible indicators:-

Firstly, we can point to an actual reduction in the average house price in October, with the value now standing at £212,551 – but this is only £70 lower than the previous month. However, it does bring to an end a three-month run from July to September 2021, in which average prices rose by an overall £11,000.

Secondly, we can show that in October only some 90 homes in Scotland were sold at a price in excess of £750k, compared to 120 in September. Nevertheless, we could point out that – if we looked at the monthly totals prior to October 2020, ie one year earlier – then 90 sales in a single month having a value over £750k would have set a new record at that time.

Thirdly, the average house price in both Edinburgh and Glasgow fell in October, with the two cities collectively accounting for approximately 25% of all property sales in Scotland. But we could also point out that the same happened in both October 2017 and October 2019, with Scotland’s average house price for those two years showing continued positive growth.

Lastly, and perhaps the most compelling argument is that England and Wales have seen their house price growth start to fall. Figure 1 below compares Scotland’s annual rate of growth, which was at 11.4% in October, with that of England and Wales combined, where rates have fallen to 4.1%. In fact, eight of the nine regions in England saw their annual rates of growth fall in October. (For a comparative Table go to Figure 4 and follow the link.)

In October, Scotland had the highest annual rate of house price growth of the four United Kingdom countries, at 11.4%, with Northern Ireland in second place at 10% (Ulster University Index), followed by Wales at 9.6% and England, without Wales, at 3.9%. England has started to see a reduction in the number of high-value detached properties being sold – perhaps due to a shortage in the level of available stock – resulting in average prices beginning to fall.

Walker-Fraser-Steele-Acadata-House-Price-Index-Scotland-October-2021-003Download

House prices rise by 13.2% to record high in Scotland

✓ 30 of the 32 local authority areas continue to see prices rise over the year  

✓ Monthly growth rates are softening  

✓ Top 5 local authority areas by value all set new record average price levels  

Produced by Acadata on behalf of  

Alan Penman, Business Development Manager at Walker Fraser Steele,  comments: “At the end of August we reported that the average Scottish house price stood at £211,029 – at that  point a new record high.

“This September we have seen the upward momentum continue. Scotland’s  average house price at the end of September stands at £212,832, which sets yet another record,  having risen by some £2,200 – or 1.0% – in the month.

“Five local authority areas in September were  responsible for 58% of the positive movement in Scotland’s average house price. The five areas  concerned, in order of influence, were South Lanarkshire, the City of Edinburgh, Glasgow City, East  Dunbartonshire and Highland. 

“More generally prices rose in 19 of the 32 Local Authority areas in Scotland. The largest increase in  average prices, of 6.3%, was in Inverclyde. In second place on the mainland was East Dunbartonshire,  with an increase in prices of 5.2%.

“There were plenty of high-value sales in East Dunbartonshire, with  a number of detached sales taking place in Bearsden – located approximately six miles to the North  West of Glasgow – the most expensive being on the Roman Road, priced at £1.3 million.  

“This underlines how property at the top-end continues to underpin this growth as people opt for  more space and continue to embrace working from home. September often provides momentum to  the market too as it is not untypical for families to reassess their needs as the new school year gets  underway.”

Commentary: John Tindale, Acadata Senior Housing Analyst  

The September housing market  

Scotland’s average house price at the end of September stood at £212,832, which sets yet another record, having risen by some £2,200 – or 1.0% – in the month. The 1.0% growth rate represents a slight softening from the 1.7% seen in August.  

On an annual basis, average house prices have increased by close to £25,000 – or 13.2% – over the last  twelve months. This is the highest rate of all four nations, and nine regions in the United Kingdom. 

It doesn’t come as too much of a surprise to learn that house prices rose in September. Looking at the  last seventeen years, house prices in Scotland have increased on thirteen occasions in September.  Estate Agents frequently mention that housing activity picks up towards the end of the school  holidays, as families potentially reassess their housing needs at the start of the new school year. 

In addition, this year we also have the added impetus of the lifestyle changes associated with the  pandemic and “working from home”, which has brought about a shift in housing preferences for  larger properties, with space for home-working becoming a prime requirement. 

The demand for larger premises has continued throughout September, and for some includes moving  to Scotland from London, or from other major cities in the UK and beyond. However, the supply of  larger homes coming to the market currently remains relatively low, which results in strong  competition for those properties that do become available, hence keeping prices high.  

We can see that prices  reached a mini-peak in March 2021, immediately prior to the ending of the LBTT tax holiday on 1 April  2021. Average prices then started to fall, as buyers of high-value properties reduced in number (see  Table 2). However, the reduction in high-value sales only continued through April and May, with June, July and August seeing a return of the higher-value transactions.  

In July, August and September 2021, we can see that prices once again regained their earlier  momentum seen during the second half of 2020, despite the savings arising from the LBTT tax holiday  no longer being available.  

Figure 1. The average house price in Scotland, for the period September 2019 to September 2021

Transactions analysis  

Monthly transaction counts  

The fall in the number of transactions for the period  March 2020 to August 2020 is clearly visible. However, what is also clearly demonstrated is that the  number of sales for each month from September 2020 to March 2021 has surpassed that of the same  month in the previous six years.  

In addition, the spike in sales that took place in March 2021 – as the tax holiday expiry date  approached – is plain, although this total was exceeded by the volume of sales in October and  November 2020, when monthly sales during the pandemic reached their peak.

Also clear is the fall in  sales in April 2021, to levels below those in all previous years except for 2016 and 2020, indicating the  extent to which buyers had managed to bring forward their purchases into March 2021 to take  advantage of the tax holiday. 

For the record, the peak in sales in March 2016 was also tax-related, and came one month ahead of  the introduction of the then 3% LBTT surcharge (now 4%) on second homes and buy-to-let properties,  which tax was pre-announced to commence from April 2016.  

Sales volumes in April and May 2021 remained lower than the equivalent months in 2017 and 2019, and appear to have been roughly on a par with the levels seen in 2018. However, in July 2021 the  number of properties sold once again appears to have been higher than the same months in the  previous six years, although sales in August 2021 returned to 2017 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 eight 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 figures. 

Scottish house prices reach new record high

  • Average house prices in Scotland reach new high of £211,029
  • All 32 local authority areas have seen prices rise over the year
  • Transaction levels in August at seven-year high
  • Monthly average increase is 1.8% (August), average annual increase is 12.1%

Alan Penman, Business Development Manager at Walker Fraser Steele, comments: “At the end of July, the average Scottish house price stood at £207,344 but by the end of August this figure was £211,029 – reaching a new record high, with a rise of £3,685, or just under 2% in the month. The race for space continues to support the prices of larger properties. The scarcity of this type of stock coupled with the continued high demand means prices remain strong.

“Property at the top-end has performed well throughout 2021 and there is no sign of any imminent let-up. We noted last month that the exceptional performance of larger properties was likely to continue and this month we have more evidence to support that view.

“People’s preference for more space and working from home has meant buyers have often sought properties that can accommodate new lifestyles. But we should remember that borrowers’ ability to afford these properties has in no small way been a result of the Land and Buildings Transaction Tax holiday earlier in the year, and the continued record low interest rates.

“In terms of the geographical performance of the Scottish regions, the area with the highest annual increase in average house prices in August was the Scottish Borders, where average prices have risen by 28.4%, which again reflects the fact that the mix of homes that have been sold in this area has trended towards the more expensive end of the market.”

Average House Prices in Scotland for period August 2020 to August 2021

Commentary: John Tindale, Acadata Senior Housing Analyst

The August housing market

Scotland’s average house price at the end of August stood at £211,029, which set a further record, having risen by some £3,685, or 1.8%, in the month. The 1.8% growth rate represents a slight softening from the six-year high of 2.7% seen in July.

As we reported last month, one of the main reasons for the current upward movement in prices is a result of the lifestyle changes associated with “working from home”, which has brought about a shift in housing preferences to larger properties, with space for home-working becoming a prime requirement.

The demand for larger premises has continued throughout August, and for some includes moving to Scotland from London, or from other major cities in the UK and beyond. However, the number of larger homes in Scotland available for purchase remains thin, with strong competition for those properties that do come onto the market, helping to keep prices high.

Looking at Figure 1 below – which tracks the average house price in Scotland – we can see that prices reached a mini-peak in March 2021, immediately prior to the ending of the LBTT tax holiday on 1 April 2021. Average prices then started to fall, as buyers of high-value properties reduced in number (see Table 2).

However, the reduction in high-value sales only continued through April and May, with June and July seeing a return of the higher-value purchases. This was perhaps assisted by those who had decided to move away from buying properties in England, where the threshold on tax savings had reduced to £250,000 at the end of June.

In July and August 2021, we can see that prices once again regained their earlier momentum, with monthly price increases more than matching those experienced during the final quarter of 2020, despite the savings arising from the LBTT tax holiday no longer being available.

Transactions analysis

Monthly transaction counts

Figure 2 below shows the monthly transaction count for purchases during the period January 2015 to August 2021, based on RoS (Registers of Scotland) figures for the Date of Entry (Applications Date for August 2021). The fall in the number of transactions for the period March 2020 to August 2020 is clearly visible. However, what is also clearly demonstrated is that the number of sales for each month from September 2020 to March 2021 has surpassed that of the same month in the previous six years.

In addition, the spike in sales that took place in March 2021 – as the tax holiday expiry date approached – is plain, although this total was exceeded by the volume of sales in October and November 2020, when monthly sales during the pandemic reached their peak. Also clear is the fall in sales in April 2021, to levels below those in all previous years except for 2016 and 2020, indicating the extent to which buyers had managed to bring forward their purchases into March 2021 to take advantage of the tax holiday.

For the record, the peak in sales in March 2016 was also tax-related, and came one month ahead of the introduction of the then 3% LBTT surcharge (now 4%) on second homes and buy-to-let properties, which tax was pre-announced to commence from April 2016.

Sales volumes in April and May 2021 remained lower than the equivalent months in 2017 and 2019, and appear to have been roughly on a par with the levels seen in 2018. However, in July and August 2021 the number of properties sold once again appears to be higher than the same months in the previous six years.

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 eight 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 12%, although this does include the spike in March 2021, which will have enhanced the 2021 figures.

Scotland transactions of £750k or higher

The above table 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.

The table shows that there have been 648 sales in excess of £750k during the first eight months of 2021. By coincidence this happens to be the same number of sales over £750k that took place in the whole of 2020, i.e. in 2021 the same total as in 2020 has been reached after just eight months. It can also be noted that the 2020 total was the highest number of sales of properties in excess of £750k of the previous six years.

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 move to 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, up to the end of March 2021. This encouraged the whole market to be more adventurous in its outlook.

As reported last month, we should also point out that one tends to get more “bang for one’s buck” in Scotland than in England. For example, the recent purchase of a £1 million home in the Scottish Borders included 5 bedrooms, 2.8 acres of garden grounds and 5 acres of grazing paddock. In London £1 million will, in some boroughs, enable you to purchase a three bedroomed Victorian terrace, with minimal garden space. It is therefore little wonder that some Londoners are looking to move to Scotland, if the workplace allows.

Local Authority Analysis

Annual change

The average house price in Scotland has increased by some £22,850 – or 12.1% – over the last twelve months, to the end of August. This is 1.4% higher than the 10.7% recorded one month earlier, and is the highest rate seen since March 2016, that date being just ahead of the introduction of the LBTT Additional Dwellings Supplement of 3% – which was introduced on the purchase of buy-to-let properties and second homes in Scotland (a rate which was subsequently increased to 4% on 25 January 2019).

This increase in the rate of annual growth in house prices comes as something of a surprise – we had assumed that since the ending of the LBTT holiday in March 2021 prices would begin to fall gently. However, it would appear that the shift in housing preferences for larger properties – with space for home working – rather than commuting to places of work, continues to influence strongly the current housing market.

In August 2021, all 32 of the local authority areas in Scotland have seen their average prices rise over the previous twelve months.

The area with the highest annual increase in average house prices in August was the Scottish Borders, where average prices have risen by 28.4%. This is not to say that each individual property sold in the Scottish Borders over the last year has increased in value by 28.4%, but rather the mix of homes that have been sold in the area has trended towards the more expensive end of the market. For example, in the Scottish Borders over the last three months there have been 12 properties sold with a value in excess of £750k, compared to just 2 such sales during the same three months in 2020.

Monthly change

In August 2021, Scotland’s average house price rose by £3,685, or 1.8%, and now stands at £211,029. This rise is smaller than the £5,530 increase seen in the previous month of July, indicating a softening in the rate of price growth over the summer.

Prices rose in August 2021 in 24 of the 32 Local Authority areas in Scotland, down from the 28 areas which saw prices increase in July. The largest increase in average prices in August, of 5.9%, was in Stirling, although this increase was assisted by the sale of a £2.4 million, nine-bedroom detached home, on the outskirts of Strathblane.

On a weight-adjusted basis, which takes into account both the increase in average price and the number of transactions involved, 5 local authority areas in August were responsible for 52% of the positive movement in Scotland’s average house price. The five areas concerned, in order of influence, were the City of Edinburgh, Glasgow City, Perth and Kinross, Aberdeen City and Stirling.

It is perhaps apposite that Aberdeen City appears in the top five authorities with the highest increase in prices in the month, as increases in oil and gas prices have been particularly newsworthy of late. All property types in Aberdeen City have experienced increases in their average prices in August, with the largest increase being seen in flats, up from an average £115k in July to £121k in August. Overall, the highest average property prices in Aberdeen occurred in March 2015 at £259,125, compared to an average £202,189 this August. At the time of the record prices in Aberdeen, the average price of flats in the city had reached £205k – clearly there is still some way to go before Aberdeen City’s housing market returns to its previous record levels.

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 16 such authorities, up from 12 in July. It is noticeable in Table 3 that eight of the top ten local authority areas ranked by price have reached new peaks, reinforcing the proposition that the main drivers of the current price increases seen in Scotland are associated with the price competition being experienced at the top-end of the housing market.

We can note that, in August 2021, Scotland’s overall average house price has itself also reached a new record level.

Heat Map

The heat map below shows the rate of house price growth for the 12 months ending August 2021. As reported above, all 32 local authority areas are reporting an increase in their housing values over the last year. The highest increase over the twelve months to August 2021 was in the Scottish Borders at 28.4% and the lowest in the Shetland Islands at 0.7%.

Comparisons with Scotland

Scotland’s Seven Cities

ENDS

Average house price in Scotland reaches new record level

  • Average house prices in Scotland reaches new record level – £207,877
  • July sees largest increase in average price in a month since March 2015, up by £6,000
  • Lack of properties on the market helping to support values
  • 2021 has highest number of sales over £750k of last seven years
  • Includes breakdown of 27 local authorities

Alan Penman, Business Development Manager at Walker Fraser Steele, comments:

“The average house price in Scotland at the end of July stands at £207,877, a new record level, having risen by some £5,950, or 2.9%, in the month. This is the largest increase in a month since March 2015 – just prior to the introduction of the Land and Buildings Transaction Tax in Scotland the following month.

“The average house price has increased by some £20,550 – or 11.0% – over the last twelve months. This is 2.5% higher than the 8.5% recorded one month earlier. The annual rate had been slowing over the previous three months from a high in March 2021 of 11.4%. But it is the continuing strong performance of larger properties that is supporting the current growth.

“Sales volumes, which now appear to be running at the levels seen in 2018, also suggest larger properties are supporting higher average prices. Lower transactions and strong prices at the top-end show that demand is exceeding supply with the focus of the market on higher value transactions supported by continuing record low interest rates.

“Combined with the previous tax savings associated with the LBTT holiday, these factors have encouraged the whole market to focus on larger properties and give cause to believe the exceptional performance of larger properties might continue for some months to come.”

Commentary: John Tindale, Acadata Senior Housing Analyst

The July housing market:

Scotland’s average house price at the end of July stands at £207,877, which sets a new record level, having risen by some £5,950, or 2.9%, in the month. This is the largest increase in a month since March 2015, which was just prior to the introduction of the LBTT in Scotland in April 2015.

One of the main reasons for the current upward movement in prices is a result of the lifestyle changes associated with “working from home”, which has brought about a shift in housing preferences to larger properties – with space for home working – rather than commuting to-and-from one’s place of work.

The demand for larger premises continues to be strong, and for some includes moving to Scotland from London, or from other major cities in the UK and beyond. However, the supply of larger homes in Scotland remains thin, with strong competition for those properties that do come onto the market.

Last month we noted that the ending of the LBTT tax holiday in March 2021 made little difference to the high-value end of the housing market, with the number of purchases of £750k plus homes in June 2021 actually exceeding those of March 2021 (see Page 5). We suggested that this was probably due to the level of tax saving being limited to £2,100 in Scotland (compared to a saving of £15,000 in England), which is a relatively small sum in relation to a property costing £750k.

The tax holiday was therefore more likely to influence buyer behaviour at lower price levels, with purchases at £250,000 qualifying for the maximum tax savings. With the number of lower-priced sales falling in July, due to the purchase of such homes having been brought forward into the earlier months of the year, this will have had the effect of raising the average price of the properties that were purchased in the month.

Looking at Figure 1 below – which tracks the average house price in Scotland – we can see that prices reached a mini-peak in March 2021, immediately prior to the ending of the LBTT tax holiday on 1 April 2021. Average prices then started to fall, as buyers of high-value properties reduced in number (see Table 2). However, the reduction in high-value sales only continued through April and May, with June and July seeing a return of the higher-value purchases. This was perhaps assisted by those who had decided to move away from buying properties in England, where the threshold on tax savings had reduced to £250,000 at the end of June.

Transactions analysis

Monthly transaction counts

Figure 2 below shows the monthly transaction count for purchases during the period January 2015 to July 2021, based on RoS (Registers of Scotland) figures for the Date of Entry (Applications Date for July 2021). The fall in the number of transactions for the period March 2020 to August 2020 is clearly visible. However, what is also clearly demonstrated is that the number of sales for each month from September 2020 to March 2021 has surpassed that of the same month in the previous six years.

In addition, the spike in sales that took place in March 2021 – as the tax holiday expiry date approached – is plain, although this total was exceeded by the volume of sales in October and November 2020, when monthly sales during the pandemic reached their peak. Also clear is the fall in sales in April 2021 to levels below those in all previous years except for 2016 and 2020, indicating the extent to which buyers had managed to bring forward their purchases into March 2021 to take advantage of the tax holiday.

For the record, the peak in sales in March 2016 was also tax-related, and came one month ahead of the introduction of the then 3% LBTT surcharge (now 4%) on second homes and buy-to-let properties, which tax was pre-announced to commence from April 2016.

Sales volumes for the period from April 2021 to June 2021 no longer exceed those of previous years, and appear to be roughly on a par with the levels seen in 2018. We will await the “Date of Entry” data for July 2021 before making a comment on this latest month.

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 six 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 figures.

Scotland transactions of £750k or higher

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 537 sales in excess of £750k during the first seven months of 2021. This total is greater than the first seven months of each of the previous six years, beating the 363 transactions seen in 2015 – which had the second highest total to the end of July – by some 174 sales. Clearly the expectation for the whole twelve months of 2021 is that high-value sales will be far in excess of all previous years.

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. But additionally we should mention the record low interest rates, which make the purchase of a top-end property more affordable, as well as the tax savings associated with the LBTT holiday, which encouraged the whole market to be more adventurous in its outlook.

There are perhaps two other features of interest that can be observed in Table 2. The first, also previously mentioned, is that sales of high-value properties in June 2021 exceeded those of March 2021, despite the earlier month having the advantage of the tax holiday. The second is that in every month in 2021 (except March) the number of high-value sales has exceeded those of the same month in the previous six years.

Perhaps while discussing high value homes we should also point out that one tends to get more “bang for one’s buck” in Scotland than in England. For example, the recent purchase of a £1 million home in the Scottish Borders included 5 bedrooms, 2.8 acres of garden grounds and 5 acres of grazing paddock. In London £1 million will, in some boroughs, enable you to purchase a three bedroomed Victorian terrace, with minimal garden space. It is therefore little wonder that some Londoners are looking to move to Scotland, if the workplace allows.

Local Authority Analysis

Annual change

The average house price in Scotland has increased by some £20,550 – or 11.0% – over the last twelve months, to the end of July. This is 2.5% higher than the 8.5% recorded one month earlier, and comes as something of a surprise, given that the annual rate had been slowing over the previous three months from a high in March 2021 of 11.4%. We had assumed that since the ending of the LBTT holiday in March 2021 prices would begin to fall gently, but it would appear that the shift in housing preferences for larger properties – with space for home working – rather than commuting to places of work, continues to affect the current housing market.

In July 2021, all bar one of the 32 local authorities in Scotland have seen their average prices rise over the previous twelve months – the one authority not to have done so being Na h-Eileanan Siar, where only 25 sales took place in July 2020. The Scottish government were discouraging house buyers from visiting the Islands during the early stages of the pandemic – so average prices on the Islands were subject to dramatic change, due to the low numbers of transactions involved.

On the mainland, the highest annual July increase in prices occurred in the Scottish Borders, up by 23.2%. In the Scottish Borders, all property types have seen prices rise over the last year, with the largest increase being in detached homes, up from an average £285k in July 2020 to £370k one year later. The rise in average prices in July 2021 has been helped by the sale of six properties in excess of £750k, compared to 11 such properties being sold during the whole of 2020.

Monthly change

In July 2021, Scotland’s average house price rose by some £5,950, or 2.9%, and now stands at £207,877. This rise is the largest gain in a single month since the £15,316 increase seen in March 2015, immediately prior to the introduction of the Land and Buildings Transaction Tax (LBTT), which came into force in Scotland on 1 April 2015.

Prices rose in July 2021 in 28 of the 32 Local Authority areas in Scotland, indicating a near universal increase in prices across the country. The largest increase in July, of 9.9%, was seen in the Orkney Islands – but this was a reflection of the small number of transactions that took place on the Islands, with low sales volumes (32 in July) often being associated with high percentage changes in average prices.

On a weight-adjusted basis, which takes into account both the increase in average price and the number of transactions involved, 5 local authority areas in July were responsible for 52% of the positive movement in Scotland’s average house price. The five areas concerned, in order of influence, were Glasgow City, the City of Edinburgh, North Lanarkshire, East Lothian and South Lanarkshire.

Some analysts have been suggesting that, in the pandemic, it is isolated rural areas that have benefitted most from the lifestyle changes associated with the move to “work from home”. However, looking at the five authorities identified as having the most influence on the price change in July, one would not necessarily draw this conclusion. It would appear that the two largest cities in Scotland are responsible for the movement of over half the change in average house prices, either in their own right, or through their influence over their major commuting hinterlands.

Meanwhile, the Highland local authority area, which one might assume is mostly rural by disposition and should therefore be attracting new residents, has seen its average house price fall by -0.5% in July. As we reported last month, all property types in the Highland area have seen prices fall, with the price of terraces dropping from £155k in June to £134k in July. There has also been a decline in the number of detached properties sold in the month. For example, in the Highland area in March 2021 there were 171 detached properties sold in the month, contrasting with 84 detached homes being sold there in July.

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 July there are 12 such authorities, up from 4 local authorities in June, as well as Scotland’s own average price, which has also reached a new record level.

Heat Map

The heat map below shows the rate of house price growth for the 12 months ending July 2021. All bar one of the 32 local authority areas are reporting an increase in their housing values over the last year, the exception being Na h-Eileanan Siar.

Comparisons with Scotland

Half of Edinburgh homeowners undervalue their homes by more than £28,000

Zoopla reveals the capital’s ‘Hidden Equity’

  • Half of Edinburgh’s homeowners undervalue their home by an average of £28,351
  • Two thirds of homeowners across Edinburgh have lost touch with the value of their home
  • More than half of homeowners in Edinburgh unlocked their ‘hidden equity’ to move to a nicer property

New analysis by Zoopla, the only property portal which offers a free instant online property price estimate, conducted as part of its inaugural Hidden Equity Survey, has found that homeowners in Edinburgh are undervaluing their homes by an average of £28,351.

The Hidden Equity Survey of 2,000 homeowners* who have had their home valued by an estate agent in the past three years establishes for the first time how accurate Edinburgh homeowners’ estimations of the value of their homes really are. It found that just one in three (33%) local homeowners have an accurate idea of the estimated value of their home.

Average home in Edinburgh worth £28,000 more than owners realise

The findings from Zoopla show that almost half of homeowners in Edinburgh (45%) who had their home valued via an estate agent or sold it in the past three years said it was worth more than they thought it was – on average by £28,351.

Bathroom bonus

When asked for their thoughts on why their homes were worth more than expected, two fifths (43%) of homeowners in Edinburgh attributed their good financial fortune to installing a new bathroom. Other popular reasons being given by homeowners in the city for their financial uplift included redecorating (41%) and work on the garden (32%).

Increasingly desired

The practicalities of improving a property aren’t the only reasons for homeowners in Edinburgh to get more for their home than they thought it was worth. Edinburgh becoming an increasingly desirable place to live has also helped to add value to the properties of homeowners, with a third (36%) of homeowners citing desirability of the city for homes being worth more than their owners expected.

The good life

For Edinburgh homeowners who went on to sell their home and benefit from their hidden equity, the financial boost had a significant impact, with the majority (84%) of homeowners saying the additional money ‘improved their lifestyle’. More than half (59%) said they were able to move into a better property than they expected as a result (for example, it had more bedrooms, was in a nicer area, had a garden etc.).

One in ten (12%) homeowners in Edinburgh used their extra cash to go on more holidays and a further one in ten (12%) gifted the money to their children to help their future plans.   

Different decisions

For Edinburgh homeowners who did not know the true value of their home until they got it valued by an estate agent, one in three (34%) said they would have made different financial decisions in the years prior if they had been aware of their hidden equity.

For property owners whose home was worth less than they expected, two fifths (43%) said they would have paid off more of their mortgage. Almost a third (29%) would have worked harder to build their savings rather than assume their home was accruing equity that they could draw on at a later date.

One in ten (14%) of homeowners in Edinburgh said they’d have spent less on non-essential purchases like jewellery, watches or expensive presents.

House prices rising

Zoopla has also revealed the latest House Price Index, which studies multiple local housing trends and prices on an annual basis. The data shows that the average house price in Edinburgh is now £241,000, with prices rising by 2.8% in the last 12 months. The data also shows prices in Edinburgh have increased cumulatively by 24.4% in the past five years.

Gráinne Gilmore, Head of Research at Zoopla, comments: “The direction of house prices has long been a staple of conversation around dinner tables across Edinburgh and many homeowners could be in for a lovely surprise if they have their property valued, according to our research.  

“Because of the impact of the pandemic, many households are re-evaluating how they want to live and this has had an impact on the local housing market. Buyer demand has soared, racing ahead of supply, putting upwards pressure on prices. House price growth in Edinburgh is currently at 2.8% annually.

“Edinburgh homeowners keen to check up on their property’s value should head to Zoopla’s My Home, where they can see an estimated value range for their property and check for potential hidden equity.

“For those keen to progress with a sale and perhaps unlock hidden equity, they can contact an estate agent using My Home to get an expert market valuation and personalised guidance on how to best navigate this busy housing market.”

Staying on top of a property’s value

As a first step, homeowners can check My Home on Zoopla.co.uk, where they can discover their home’s worth with an instant online estimate based on powerful market data. They can also keep track of their house price estimate and access a timeline of their home’s sales history.

My Home also allows homeowners to track the estimated value of other homes in their neighbourhood, as well as homes they might want to buy in the future. Zoopla is encouraging homeowners to get estate agent valuations of their home – the most accurate way to value a property – to see if they are sitting on more equity than they think. 

No freeze in property sales this winter, says Warners

HOUSE PRICES in the city are remaining steady in spite of the significant year on year jump in the number of homes changing hands.

Warners Solicitors & Estate Agents has revealed that their sales in the three months to October were up 36% on the same period last year, while the average house price has risen only 2.8% over the same period. Continue reading No freeze in property sales this winter, says Warners

Edinburgh’s Housing Market Banishes Brexit Blues

WITH TEMPERATURES rising in the capital, property market activity among both buyers and sellers is continuing to hit record levels.  According to Warners Solicitors & Estate Agents, activity is at its highest since the ‘credit crunch’, and shows few signs of slowing down despite the prospect of Brexit. Continue reading Edinburgh’s Housing Market Banishes Brexit Blues