Hopes for a more stable 2024 as value of capital firm’s deals reach new high
A firm of solicitors and estate agents hailed a strong bounceback from political unrest as its home sales in Edinburgh reached a record £106m during 2023.
The new high was hit by capital-headquartered Lindsays despite the impact of economic turbulence and rising interest rates which hit the market.
It is the second successive year that the total value of homes sold by the firm in Edinburgh has topped £100m – having been £102m in 2022.
The total has been hailed a significant success for the firm in the face of what they describe as a “long hangover” from former Chancellor Kwasi Kwarteng’s emergency budget of 2022 and of the nervousness caused by rising interest rates and the cost of living.
Lindsays also warned that politicians north and south of the border should be aware of the impact their decisions have on people and property.
Maurice Allan, Managing Director of Lindsays’ Residential Property team, said: “These figures are a significant success for us, especially given the turbulence we saw in the market during the first half of the year. When you consider all of that, Edinburgh has really held its own.
“The consequences of political decisions have a real impact on peoples’ lives and can be long-lasting. We saw that with the emergency budget and the long hangover which followed for the property sector.
“It took time for people to work out what the impact of all of that was on their finances – and many delayed making offers on properties as a result, practically shutting down the market.
“Yet, over the course of the rest of the year, the market has proven to be fairly resilient. Supply has improved – and good houses continue to sell well. People have adapted to the financial circumstances and regained the confidence to get back into the market.
“We’re not seeing the huge offer prices over valuation that we were post-lockdown, but what we have essentially seen over the past 12 months is a market which has returned to pre-pandemic levels, which is not a bad place to be.”
Lindsays’ Edinburgh-based estate agency team operates mainly throughout the city and the Lothians.
The total number of property sales during the year was also broadly in line with the previous 12 months – with the average price of homes sold through the firm up in Edinburgh up by about 1.5% to £330,000.
And, looking forward, there are hopes of a more stable market during the next 12 months.
Mr Allan added: “While it’s always difficult to predict what might lie ahead, there are genuine signs of positivity.
“The conversations we are having signal a growing belief that interest rates have peaked. With things more stable, many of those who have been sitting on their hands because interest rates were going up and up are now starting to think seriously about doing something in 2024.”
House sales throughout the wider Lindsays group totalled £174m – with £67.9m sold through its estate agency team in Dundee.
East Lothian becomes authority with highest average values
Sales of high-value homes in 2022 continue to exceed those in 2021
Transaction levels in 2022 match those of 2019
Monthly house price change up 0.2%, 6.7% up annually
Average Scottish house price now at £224, 644
Table 1. Average House Prices in Scotland for the period November 2021 – November 2022
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:“Our data this month may, at first glance, look at odds with other published indices issued by lenders but it is important to understand our higher rate of growth for the period includes all property transactions.
“This is particularly crucial in Scotland as a third of these transactions are made in cash. It is also important because it means this third is not as constrained by the cost of mortgage finance.
“Our data is also drawn from the latest available provided by Registers of Scotland so it uses actual completion prices for November, which may have been agreed earlier in the year, as opposed to precompletion valuations or estimates.
“Scotland is not alone in seeing tentative price growth increases, but our analysis makes a clear point of the value of looking beyond mortgage borrowing for a real understanding of what is going on.
“Property across the UK since the start of the pandemic has consistently out-performed inflation – the average house price in November reached £224,644 – an increase of £40,800 since March 2020, which reflects a comparative growth for the period of 22% compared to consumer prices which have grown by 14.9%.
“On a monthly basis, November’s average price grew by £400 or 0.2%, which though slight in the scheme of things, still means the average house price is at a record high for a ninth time in 2022.”
Commentary: John Tindale, Acadata Senior Housing Analyst
The November housing market
Average house prices in Scotland continued to rise during November, although the increase was a modest £400, or 0.2%. Average prices have now reached £224,644, which is some £14,100, or 6.7%, higher than a year earlier. This sets another new record average price for Scotland, the ninth to date in 2022.
Indeed, if we look at the change in values since the start of the pandemic in March 2020 – when the average house price in Scotland was £183,853 – there has been an increase of some £40,800, or 22%, in the average house price to the end of November 2022. This compares favourably with the increase in consumer prices of 14.9%, measured by CPIH, over the same period. Property prices have hence risen in real terms over the last nearly three years.
With the UK-wide annual November headline rates of the Halifax and Nationwide indices at 4.7% and 4.4% respectively, it may be surprising to see Scotland at a higher rate of 6.7%. However, it should be recognized that the lender indices only relate to properties purchased with a mortgage, while 33% of Scotland’s properties are typically acquired with cash. One third of purchases will therefore not necessarily have been influenced by the recent rise in interest rates.
Also of relevance is the fact that the North West and North East regions of England have annual price increases of 12.9% and 13.4% respectively, so Scotland is not alone in seeing rates above those announced by the lenders.
Figure 1. The annual rate of house price growth in Scotland over the period March 2020 to November 2022
The RICS Residential Market Survey for November indicates that activity in the home sales market has continued to weaken, with higher interest rates and a difficult macro-economic outlook taking their toll on buyer sentiment, and indicators on new instructions and agreed sales remaining negative.
The survey did, however, advise that respondents report that, for now, prices continue to edge higher in Scotland – although the pace of growth is significantly softer than earlier in the year. This is in line with our own findings, derived from the price data supplied by RoS, which includes all domestic transactions based on both cash and mortgage sales.
Local Authority Analysis
Table 2 above shows the average house price and percentage change (over the last month and year) by Local Authority Area for November 2021, as well as for October and November 2022, 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 November 2022. Local Authority areas shaded in blue experienced record average house prices in November 2022.
Annual change
The average house price in Scotland in November 2022 has increased by some £14,100 – or 6.7% – over the last twelve months. Although the annual rate of growth has increased marginally in November, up 0.2% on October’s revised 6.5%, the rate of growth has reduced from June’s 10.4%, which now looks as though it will represent the high point of 2022. However, prices continued to climb in November, albeit at a reduced rate compared to June, with Scotland setting another record average house price, of £224,644 in the month, for the ninth time this calendar year.
In November 2022, 29 of the 32 local authority areas in Scotland saw their average prices rise above the levels of twelve months earlier, the same number as in October. The three areas where values fell over the year were, in descending order, Aberdeen City (-8.1%), Scottish Borders (-2.1%) and Inverclyde (0.0%), although in Inverclyde average prices were just £9 lower than they were twelve months previously.
In Aberdeen City, which has fallen seven places over the year to 25th in terms of its ranking of average prices compared to the other 31 local authorities in Scotland, it is detached homes that have experienced the largest fall, from an average £390k in November 2021 to £350k one year later.
The area with the highest annual increase in average house prices in November 2022 was East Lothian, where values have risen by 14.7% over the year. This takes East Lothian to the top of Table 2 in terms of average values, ahead of the City of Edinburgh.
The rise in prices in East Lothian has been assisted by the sale of The Balfour, a 9,000 sq. ft 4-bedroom apartment, being the ground floor of Whittingehame House, Haddington, for £2.4 million.
Technically, The Balfour is classified as a flat, since it shares a common entrance with other apartments to the main building, so this sale becomes the most expensive ‘flat’ to be sold in East Lothian for at least the last five years.
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 November which accounted for 51% of the £14,100 increase in Scotland’s average house price over the year.
The six areas in descending order of influence are: – Edinburgh (19%); Glasgow (10%); East Lothian (7%); North Lanarkshire (5%); West Lothian (5%); and Fife (5%).
Monthly change
In November 2022, Scotland’s average house price in the month rose by some £400, or 0.2%. This follows October’s rise in prices of £630, but August and September’s decreases of -£290 and -£320 respectively. These two months were the first falls in Scotland’s average house price since June 2021.
In November 2022, 17 of the 32 Local Authority areas in Scotland experienced rising prices in the month, which is one less than the 18 in October. Of the 17 local authorities with price rises in the month, 8 are in the top 16 areas when ranked by price, with 9 being in the lower half of the market.
The distribution of those with price rises is therefore evenly matched between the higher- and lower priced areas in Scotland.
However, if we look only at the areas with price falls, then the top half of the areas by value saw an average fall of -1.1% in the month, while the average for the bottom half by value amounted to -2.5%. So those areas with the highest falls in the month tended to have the lowest average values.
The largest increase in average prices on the mainland in November was, for the second month running, Clackmannanshire, up by 5.6%. This month the increase in the average price was helped by the sale of a four-bedroom detached home, with stables and a paddock, just to the east of Dollar, which is evenly located between Glasgow (36 miles) and Edinburgh (37 miles).
It was put on the market for offers over £1 million – it sold for £1.21 million – becoming the second-highest priced sale in Clackmannanshire since August 2019.
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 November, there are 8 such authorities, down from the 12 in October. Scotland itself has also set a new record average house price of £224,644 in the month.
Scotland transactions of £750k or higher
Table 3. The number of transactions by month in Scotland greater than or equal to £750k, January 2015 – November 2022
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 123 such transactions recorded by RoS during the month, with 78 relating to November 2022 and 45 to October 2022, increasing the number recorded to date in 2022 to 1,084. The total recorded in 2021 to the end of November amounted to 1,020, so it is looking extremely likely that 2022 will be establishing a new high for such sales in a year – there are already eight months in which the 2022 totals are either higher than or equal to one year earlier.
As reported last month, 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. This “race for space” continues to result in strong competition for high-value homes, which are in relatively short supply, causing prices to continue to creep upwards at the top-end of the market.
The six authorities with the largest number of the 1,084 high-value sales that have been recorded to date in 2022 are: Edinburgh (530); Glasgow City (70); East Lothian (65); Fife (56); East Renfrewshire (42); and finally Perth and Kinross (41). From these figures it can be seen that in 2022, the City of Edinburgh accounts for just under half of this sector of the housing market.
Transactions analysis
Figure 2 below shows the monthly transaction count for purchases during the period from January 2007 to November 2022, based on RoS (Registers of Scotland) figures for the Date of Entry (November 2022 totals are based on RoS Application dates).
The graph starts in 2007, which was something of an exception, with close to 150,000 domestic property sales in the calendar year. The 2007 sales total is the largest seen during the last 18 years, although the period from 2004 to 2006 came close, with an average 139,000 sales on an annual basis.
However, during 2008 the banking industry began to suffer its credit crisis, with home loans becoming difficult to obtain, especially for first time buyers. Accordingly, the number of housing transactions fell to approximately 70,000 per year over the period from 2009 to 2012.
Normality was slowly restored from 2013, with sales rising to a yearly average of 87,500 over the period from 2013 to 2015, rising to an average 102,000 sales per annum from 2016 to 2019.
The effect of the Covid pandemic – which started in March 2020 – can be clearly seen on 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, as lifestyle changes and the LBTT tax-holiday pushed up demand – especially for properties with space to allow for working from home.
Figure 2. The number of sales per month recorded by RoS based on entry date from 2007 – 2022
In Figure 2, three peaks can be seen after March 2020: in October 2020 (pent-up demand from the low transaction levels in 2020) and March and June 2021 (LBTT tax-holidays encouraging sales). In the first eleven months of 2022, transaction levels have averaged 8,635 sales per month, which closely matches the average 8,610 sales per month recorded in the first eleven months of 2019 – the last full year prior to Covid.
Heat Map
The heat map below shows the rate of house price growth for the 12 months ending November 2022. As reported above, 29 of the 32 local authority areas in Scotland have seen a rise in their average property values over the last year, the three exceptions being Aberdeen City, the Scottish Borders and Inverclyde. The highest increase on the mainland over the twelve months to November 2022 was in East Lothian at 14.7%. 10 of the 32 local authority areas had price growth of 10.0% or higher – three more than in October 2022.
Comparisons with Scotland
Figure 3. Scotland house prices, compared with England and Wales, North East and North West for the period January 2005-November 2022
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–November 2022
Scotland’s Eight Cities
Figure 5. Average house prices for Scotland’s eight cities from September 2021–November 2022
Figure 6. Average house prices for Scotland’s eight cities November 2022
Scott Jack, Regional Development Director at Walker Fraser Steele, comments: “As the principal drivers underpinning much of the house price growth in the Scottish house market over the last couple of years (the pandemic, record low interest rates and the fiscal stimulus of the Stamp Duty holiday) become a distant memory, it’s no surprise that the housing market reflects this.
“This is not only happening here in Scotland but is reflected across the broader UK housing market.
“The average price paid for a house in Scotland in September 2022 was £223,604 which represents a reduction of £485, or -0.2%, from the price seen in August. It is the second fall in a row for Scotland’s monthly average house price, but this follows 13 months of successive gains.
“If we take stock for a minute of the longer-term performance, we can see that while the average price has fallen in the month, it remains some £13,300, or 6.3%, higher on an annual basis than it was twelve months earlier.
“Clearly, we should not be surprised if this annual rate of price growth slows for the reasons I have outlined. But things to keep an eye on include the budget this week, the expectation that inflation is easing, and that mortgage rates and affordability will improve in the first quarter of next year, and the lack of supply that has always supported higher prices. These may all mean this reduction in house prices is less short-lived than many suspect.”
Commentary: John Tindale, Acadata Senior Housing Analyst
The September housing market
The average price paid for a house in Scotland in September 2022 was £223,604. This represents a fall of £485, or -0.2, from the price seen in August, and is the second fall in a row for Scotland’s monthly average house price, following 13 months of successive gains.
Despite the average price having fallen in the month, the price is still some £13,300, or 6.3%, higher on an annual basis than it was twelve months earlier. However, the annual rate of price growth is slowing – having nearly halved over the last three months – from the 10.4% growth in June, to September’s rate of 6.3%.
Figure 1 below gives a sense of the direction of travel in the annual price growth over the past two years. As can be seen, the peak in growth rates occurred in September 2021 at 12.8%.
This was then followed by a period of slowing rates, which had fallen to 6.4% by March 2022, but regained traction during the early summer months of 2022 as demand for homes increased, against a backdrop of a reduced supply of properties coming to the market, with annual rates reaching a high of 10.4% in June 2022.
The slowing in rates after the June peak can then be seen, to September’s figure of 6.3% – the lowest rate since the 5.9% of November 2020.
The RICS Residential Market Survey for September suggests that the home sales market continued to lose momentum amid deteriorating macro conditions, with indicators on new instructions and agreed sales remaining negative.
As we discuss in the analysis of transactions on page 4, there is some evidence that the number of sales taking place in Scotland is currently below that of the pre-Covid years, but at present the reduction is relatively slight, at -6%. In addition, the reduction does not appear to apply to all sectors of the market at the same rate.
Sales of high-value properties in the first nine months of 2022 are at a record high, with few indications that the pace of such sales is diminishing. Edinburgh continues to dominate the high-end market, with half of all sales over £750k taking place in the capital. Edinburgh and the three Lothians have all set new record average house prices in September.
Transactions analysis
Figure 2 below shows the monthly transaction count for purchases during the period from January 2007 to September 2022, based on RoS (Registers of Scotland) figures for the Date of Entry (September 2022 totals are based on RoS Application dates).
The graph starts in 2007, which was something of an exception, with close to 150,000 domestic property sales taking place in the calendar year. The 2007 sales total is the largest seen during the last 18 years, although the period from 2004 to 2006 came close, with an average 139,000 sales on an annual basis.
However, during 2008 the banking industry began to suffer from its credit crisis, with home loans becoming difficult to obtain, especially for first time buyers, with the number of housing transactions falling to approximately 70,000 per year over the period from 2009 to 2012.
Normality was slowly restored from 2013, with sales rising to a yearly average of 87,500 over the period from 2013 to 2015, rising to an average 102,000 sales per annum from 2016 to 2019. This level was still some 25% below the levels seen during the period 2004 to 2006 – it was generally believed there had been a shift in the housing market, away from owner occupation to rental premises.
The effect of the Covid pandemic – which started in March 2020 – can be clearly seen on 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, 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 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.
However, what can also be seen is that in 2022 sales volumes appear to be at the lower end of the period from 2016 to 2019; for example the average level in 2022 from March to August was 8,700 sales per month, compared to 9,250 per month in 2017 – a 6% reduction in sales.
Figure 2. The number of sales per month recorded by RoS based on entry date (RoS applications date for September 2022), for the period 2007 – 2022. (Source: Registers of Scotland.)
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.
CAPITAL buyers are being caught in a “vicious circle” caused by property shortages, according to leading experts. New findings from Warners Solicitors & Estate Agents show that buyers are delaying putting their own property up for sale until they can find a suitable property to buy, leading to a staggering 50% drop in the number of homes available for sale in Edinburgh.Continue reading Edinburgh buyers caught in “vicious circle” of home shortages
SELLERS in and around the capital continue to find conditions in the local housing market favourable, with around nine of every ten properties selling above Home Report valuation.
According to Warners Solicitors and Estate Agents, almost 90% of Edinburgh homes sold since December have achieved a price in excess of their Home Report valuation – around a 20% increase on last year’s numbers.
Although good news for sellers, conditions aren’t so favourable for those looking to purchase a property in the capital. Thanks to the rise in demand, more buyers than ever are being left paying over the odds in order to secure a property.
David Marshall, Operations Director with Warners, (above) explained: “The property market in Edinburgh and the Lothians remains challenging for buyers, and in particular those who are looking to get onto the property ladder.
“Take the example of a first-time buyer looking to buy a one-bedroom flat in Edinburgh valued at £130,000.
“As properties are achieving an average premium of 6.7% above their valuation, on average, we can expect this flat to sell for £8,710 more than its valuation.
“For many that presents a hurdle that is difficult to overcome without turning to the ‘Bank of Mum and Dad’ for assistance, if that is an option open to them.”
However, there is a ray of hope for Edinburgh house hunters as the number of homes coming onto the market continues to show signs of improvement.
New listings through Warners have risen by just under 10% on an annual basis as the strong conditions tempt more sellers to get their homes onto the market.
David added: “The improvement in the supply of properties to the market will help to ease pressure on buyers over the medium term.
“We are also seeing signs that the property market south of the border has started to slow down somewhat and it is likely that this will have a knock-on effect to the local market as we move forward.
“At this stage we continue to expect there to be greater balance between supply and demand as we move forward in 2018 and this will help to moderate some of the high premiums we are currently seeing in the months ahead.”
Warners Solicitors and Estate Agents is one of Edinburgh’s leading estate agents, operating three property centres throughout the city.
