Solicitor and estate agents records year-on-year rise with market holding strong – and prices significantly ahead of pre-pandemic level
Average house prices in Edinburgh are more than £60,000 higher than before the Covid-19 pandemic, city-based solicitors and estate agents Lindsays has found.
And the firm says that prices across Edinburgh and throughout the Lothians show no signs of dropping – with values remaining stable and strong.
Lindsays has revealed that the average price of homes it sold through its Edinburgh office in the 2022-23 financial year was £322,250. That compared to £259,893 in 2019-2020. The firm’s average price in 2021/22 was £314,798.
After two years of unprecedented activity since the nation emerged from the first coronavirus lockdown in 2020, its estate agency team says volumes have returned to pre-pandemic levels.
Maurice Allan, Managing Director of Lindsays’ Residential Property department, said: “We’ve read lots of headlines about house prices dropping. We’re not seeing that. Edinburgh – as with other parts of Scotland – is bucking the trend that’s being reported elsewhere.
“We’re not in a market where prices are dropping. In fact, it’s a market that’s pretty solid. Family houses are continuing to enjoy strong attention and are going for real premiums.
“After a couple of quite remarkable years, we are seeing the market return to more normal levels of activity, last seen really in 2019.”
Property prices rose rapidly as the market intensified amid incredible demand following the lockdowns.
Activity began cooling in the face of political and financial instability last year, which saw interest rates – which had been at historic lows for a number of years – increase, coupled with the rising cost of living.
But this has not led to a drop in prices across Edinburgh and the Lothians.
Mr Allan added: “For the vast majority of properties, prices are holding up well. What we’re not seeing now, however, are the extremes that we experienced in a relatively small part of the market when competition was at its most intense.
“We are not finding that properties are selling below their home report valuation. And properties are selling. Finance is still available for people – and many people still have healthy deposits.
“The issue is not whether people are worried about being able to afford to move, it’s whether they can find the right property to suit their circumstances, whether that be needing a bigger home, downsizing or relocating.
“If they can find the right property to move to, they will put their current home on the market. It’s a supply and demand issue.
“Most people are trading in the same market. So, if someone finds the right home and they are ready, we are finding they just go for it.”
In Dundee, where Lindsays’ estate agency team also operates, the average prices of homes sold in the 2022-23 financial year was £205,790. That compared to £161,786 in 2019-2020. The firm’s average price in 2021/22 was £181,849.
The current Bank of England interest base rate is 4.25%. Some mortgage market analysts have stated that they expect mortgage rates to gradually decline throughout the year, even if interest rates go up.
According to solicitor estate agents’ collective ESPC, the average selling price of property across Edinburgh, the Lothians, Fife, and the Borders rose 1% to £270,284 during January to March this year.
Its members recorded the average property achieving 102.8% of Home Report valuation at sale.
How the new interest rates affect house prices and rent
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Landlords will likely increase rent prices or sell to cope with increased mortgage repayments
Inflation and interest rates will keep rising, but house prices are already slowing down
The Office for National Statistics announced last month that UK inflation rose to 10.1%, from 9.4% two months earlier. The Bank of England expects it to further increase, peaking at 13.3% in October. The accompanying higher interest rates, currently at 1.75%, and bleak two-year economic outlook generally means bad news for homebuyers, landlords and renters across the UK.
Top market analysts at CMC Markets expect interest rates to further rise to 2.25% in September. This directly impacts mortgages on variable rates – around 1 in 5 households in the UK – and another 3.1 million whose fixed-rate periods expire in 2022-2023, according to UK Finance estimates.
Borrowers whose repayments are directly linked to the base rate, as set by the Bank of England, will now face mortgage repayments at rates between 3% and 4%, up from 1.75% and 2.75% only five months earlier. This will inevitably spill into rent prices.
CMC Markets analysed the latest data for June 2022 from HM Land Registry, published on August 17th, and concluded that the likely tendency for house prices is in a temporary slowdown, which is good news for those waiting a little longer to buy a home.
Michael Hewson, Chief Market Analyst at CMC Markets comments: “Houses sold in June 2022 only increased in price by 1% compared to May, whereas, last year, this constituted a much more generous 5.7% surge.
“This is only the first month this year for prices to slow down at such a fast rate, so some caution before jumping to conclusions is advised. Remember, house prices may be slowing down, but they are not decreasing. Importantly, since this is transactions data processed at the time, it does not take into account the big leap in interest rates that the Bank of England announced later that month, let alone the even bigger hike in August.
“Therefore, despite the soaring inflation and rising consumer prices across the board, UK house prices appear to be trailing behind because demand for homes has generally come to a screeching halt. Most buyers are weathering the storm for a few more months at least, while some are also working out how the cost of living crisis will pan out in the medium term so that the new mortgage is not squeezing their pockets beyond their comfort zone.
“For those still keen to get on the property ladder, there are plenty of fixed-rate banking products that can insulate them from the current spiralling interest rates on mortgages. They should, however, prepare for the possibility of being faced with higher-than-expected repayments once the fixed rate period expires, as the new variable rates are at the lender’s discretion. Fixed rates are not a cure-all either, as they may now be set to a higher level to start with.
“The buy-to-let market is equally volatile. Landlords will either pass the increased mortgage repayments onto tenants by increasing their rent or simply sell fast to lock in a better price.
“Right now though, those already on the property ladder are generally better off staying put rather than moving or re-mortgaging. They would not get a good deal on their old house in this market and may likely end up losing more money overall.”
What did the Bank of England do earlier in August?
The Bank of England explained that the rise in interest rates was necessary due to external pressures which are expected to persist. This means that British firms and residents will continue to feel this weight reflected on rising domestic prices, wages outpaced by soaring inflation, and even higher mortgage repayments, despite the Bank’s attempt to widen the borrowing pool through less restrictive mortgage rules.
Although historic, the Bank’s decision was not a surprise for trading analysts at CMC Markets, a London-headquartered financial services company, who believe the Bank was expected to raise interest rates higher than 1.25% during the June meeting, as a means to keep import inflation in check.
This is on the backdrop of a 10% year-to-date depreciation of the British pound sterling against the US dollar and an indication from the Federal Reserve, the US central bank, of a further interest rate increase by 0.5% or 0.75% in September.
Michael Hewson comments: “The UK currently fares worse than both the EU and the US. This is due to its closer dependence on energy shocks than the States and less government intervention to soften the blow compared to its European counterparts.”
What’s next and when will things calm down?
Other than adjusting the interest rates to the accurate level to keep abreast of import inflation, the economic projections for the UK paint a bleak outlook for the next two years.
The UK is projected to enter a recession in the final quarter of this year, the Bank of England announced. The country’s economy will contract by 1.25% in 2023 and 0.25% in 2024, however, inflation is becoming a much bigger long-term threat, with unrealistic chances of falling back to the desired 2% much before 2024.
The current political race for the Conservative Party leadership and the consequent fiscal policies promoted by the new British government is a major factor to take into account for any inflation, GDP, and unemployment projections and investment decisions.
As it stands with the current measures, inflation is expected to peak at 13.3% in October – a sharper increase than the Bank anticipated in June, originally estimated at 11%. It will continue to rise throughout 2023 only to decline in 2024.
Meanwhile, forecasts for the Consumer Price Index (CPI) are less optimistic now, expected to decrease only to 9.5% in the third quarter of 2023, although the Bank anticipates a sharp fall in prices immediately thereafter.
Selling prices are set to increase to reflect rising costs while real household post-tax income is expected to plunge in 2022 and 2023. The Bank predicted that core prices will peak at 6.5% this year, meaning that, in the following six months, food and energy will constitute more than half of the headline CPI.
The next meeting for the Monetary Policy Committee, where the Bank of England will decide what the new base interest rates might be, is set for September 15th.
House Price Index for Scotland in December from Walker Fraser Steele
Key points:
Average house price £213,646
Monthly change up 0.4%, up 7.7% annually
31 of 32 Local Authorities continue to see average prices rising over the year
Transactions up by 11% on 2019 levels
The Lothians have seen the highest price increases during the last ten-years
Alan Penman, Business Development Manager at Walker Fraser Steele, comments:“This can only be described as an exceptional annual performance with thirty-one of the thirty-two Local Authority areas in the country recording rising prices over the last twelve months.
“Though we can see from our data that the annual rate of price growth has begun to slow in pace, house prices continue to rise ending the year on a new high of £213,646. When we look back at the start of the year, this figure is in stark contrast with the average value of £198,384. It is incredible to think that December 2020 was the last month in which Scotland’s average house price was below £200,000.
“When you step back, as we have in this report, and cast your eye over what has happened to house prices in the last 10 years in Scotland, the percentage rise in Scotland’s average house price is some 38%.
“The last five years accounts for most of this growth and in particular the pandemic period when the demand for bigger properties to accommodate post-pandemic working and living needs and the lack of suitable stock have supported growth.
“The Lothians have benefitted most with Edinburgh’s commuter belt experiencing considerable activity during the pandemic as buyers seek plenty of space outside the city centre, but within reasonable commuting distance.”
Commentary: John Tindale, Acadata Senior Housing Analyst
The December housing market
In December 2021, the annual rate of house price growth has continued to slow, for the third month in succession, and now stands at 7.7%. This is down from a peak of 13.1%, recorded in September 2021. However, the rate of fall in December was the lowest of the last three months, amounting to a 1.4% reduction from November’s rate of 9.1%, which itself was 2.3% down on October’s rate of 11.4%.
In Table 2 on page 5, we show that the number of homes that were purchased at a price of £750k or higher has reduced from a peak of 127 – which occurred in September 2021 – and now amounts to 74 such properties in December, although this number is likely to rise as further purchases are processed by Registers of Scotland during this next month.
Even though the annual rate of price growth has started to slow, prices are continuing to rise, with 31 of the 32 Local Authority areas recording rising prices over the last twelve months. Scotland has ended the year on a new high of £213,646, which contrasts with a value of £198,384 at the start of the year – December 2020 being the last month in which Scotland’s average house price was below the £200,000 threshold.
On pages 9 and 10 of this report we cover the change in house prices in Scotland over a ten-year period, from December 2011 to December 2021, which makes for interesting reading. Scotland’s average house price over this time has risen by some 38%, the majority of this growth having taken place during the last five years and especially since the start of the pandemic.
Analysis shows that, on the mainland, the Lothians that have seen the highest growth in house prices over the last ten-years – suggesting that it is Edinburgh’s commuter belt that has witnessed considerable activity during the pandemic, with many purchasers looking for a home with plenty of space outside the 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 December 2021, based on RoS (Registers of Scotland) figures for the Date of Entry. (December 2021 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 13,028 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, and also benefitted from the LBTT tax reductions available from 15 July 2020 to 31 March 2021 (inclusive).
Also noteworthy 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 November 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 11%, although this does include the spike in March 2021, which will have enhanced the 2021 totals.
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 1,088 sales in excess of £750k during 2021, and we anticipate that there will be at least a further 26 additional sales in December 2021, not yet recorded by the Registers of Scotland and hence not included in the above total.
Sales of high-value properties in 2021 will therefore likely reach 1,100 in number, once RoS updates its figures, which are due to be published at the end of February. Hence annual transactions of £750k or higher in 2021 will likely be double those in 2018 and 70% higher than in 2020.
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 look for 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, available up to the end of March 2021. This encouraged the whole market to be more adventurous in its outlook.
However, even with the additional 26 as yet unrecorded sales being taken into account, December 2021 will be the third month in a row in which the number of homes purchased with a value of £750k or higher will be lower than that recorded in the same month of the previous year.
For the record, the five areas with the highest number of sales of £750k or above in 2021 were (with the number of high-value sales in brackets):- City of Edinburgh (547); Glasgow City (90); East Lothian (61); Fife (41); and Perth and Kinross (41).
Annual change
The average house price in Scotland has increased by some £15,250 – or 7.7% – over the last twelve months, to the end of December. This is a reduction from the £17,700 growth in prices seen to the end of November 2021, and is now the third month in succession in which the annual rate of house price growth has slowed, having reached an annual rate of 13.1% in September 2021.
In December, Scotland’s growth rate trails Wales rate of 8.5% by 0.8%, but in percentage terms is still higher than seven of the nine GOR regions in England, including that of Greater London.
In December 2021, 31 of the 32 local authority areas in Scotland saw their average prices rise over the previous twelve months. The one area with a price fall compared to one year earlier was East Renfrewshire, where prices of detached homes have fallen from an average £440k in December 2020 to £427k in December 2021.
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 homes purchased in December 2020, but only two in December 2021. This is symptomatic of a general, but still relatively slight, reduction in the purchase of high-value homes in Scotland during the final quarter of 2021.
The area with the highest annual increase in average house prices in December was the Orkney Islands, where average prices have risen by 28.5% over the year – sales this month included a delightful detached property in St Ola which sold for £820k. On the mainland, the highest rise in prices over the year occurred in Stirling where average prices rose by 16.7%. Sales in the month included 4 homes valued at over £750k, including a 4-bedroom new build detached property in Blair Drummond, located some 5 miles to the North West of Stirling and overlooking the Trossachs.
Monthly change
In December 2021, Scotland’s average house price in the month rose by some £900, or 0.4%, compared to a rise of £200 in November. The average price of a home in Scotland now stands at £213,646, which sets a new record level for the nation for the eighth time in the last twelve months.
In December, 19 Local Authority areas in Scotland experienced rising prices in the month, with 13 seeing prices decline. The largest increase in average prices in the month of December, of 10.6%, was in Na h-Eileanan Siar, followed by the Orkney Islands at 7.1%: 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.
On the mainland, East Lothian saw the largest increase in prices in the month, of 4.9%. This increase in its average price was helped this month by the purchase of the second most expensive detached home in East Lothian of the last twelve months, for £2.1 million. The home, which has six bedrooms, is located in North Berwick, approximately 0.5 miles from the Railway station. Interestingly, North Berwick was recently identified in the Daily Telegraph as being one of the most favourite commuter locations for Edinburgh, with a travel time of 30 minutes into Waverley Station. As a result of this high value transaction, the average price paid for properties in the area increased in the month and has resulted in East Lothian currently having the highest average property price of all the 32 Local Authority Areas in Scotland, pushing Edinburgh down into second place (see Table 3). The last time that East Lothian topped this Table was in March 2016.
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 December there are 14 such authorities, the same number as in November. We can also add that Scotland itself has set a new record average price in December 2021 ~ ending the year on a high!
Heat Map
The heat map below shows the rate of house price growth for the 12 months ending December 2021. As reported above, all but one of the 32 local authority areas in Scotland are reporting an increase in their house values over the last year. The one area with negative growth is East Renfrewshire, where prices over the year have fallen by -1.2%. The highest increase over the twelve months to December 2021 was in the Orkney Islands at 28.5% – on the mainland it was Stirling that was top with price growth of 16.7%.
Scotland’s housing market – The last ten years
Given that we are reporting on December’s housing data, we considered it would be an appropriate opportunity to take a longer-term view of Scotland’s housing market. Figure 3 below shows the average house price in Scotland for the period December 2011 – December 2021.
The graph starts in December 2011 in the aftermath of the banking credit crisis of 2008/09, with prices still falling by -3.4% on an annual basis to December 2012 – the lowest point on the chart. However, from December 2012 onward prices began to climb with annual growth remaining at a near constant of some 3% per annum up to the start of the Covid pandemic in March 2020.
There is an interesting and very noticeable spike in prices which occurred in March 2015, which reflects the period immediately ahead of the introduction of the then new LBTT (Land and Buildings Transaction Tax – which replaced the previous UK-wide SDLT (stamp-duty land tax)) coming into force on April 1st 2015. House purchasers in the first quarter of 2015 looked to forestall the new tax by purchasing high-value properties prior to its introduction, causing a substantial rise in average house prices at the time.
After an initial dip in house prices at the start of the pandemic, the market recovered, partly spurred on by the change in lifestyles, reflecting a movement to work from home – the so-called “race for space”, with prices also climbing due to the LBTT tax holiday, the low interest rates resulting in properties becoming more affordable, and the increase in household savings as expenditure on items such as foreign holidays and other luxuries diminished.
A dip in prices can also be seen in April 2021, as the LBTT tax-holiday came to its end, but price growth subsequently recovered, reaching a peak of 13.1% on an annual basis in September 2021. The current annual rate of 7.7% in December 2021 closely matches the rate of 7.5% seen in December 2020.
Table 4 above splits the ten-year period into two groups of five years. As can be seen, the larger increase in prices occurred during the last five years – with the highest growth rates happening during the pandemic from June 2020 onward.
Looking at the ten-year time span, the highest growth in prices was in the Orkney Islands at 79.9% – but this is likely to have been a function of purchasers buying second homes on the Islands for personal use or for holiday-home lets.
However, looking at the ten-year period for areas on the mainland, the top three spots in house price growth are taken by the Lothians, with Midlothian at 62.2%, East Lothian at 54.6% and West Lothian at 53.8%. This suggests that it is the commuting areas in close proximity to Edinburgh that have seen the highest growth in prices over the last ten-years.
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.
EDINBURGH’S property market enjoyed its busiest summer in more than a decade, according to figures released by one of the capital’s leading experts.
Data from Warners Solicitors & Estate Agents reveals that sales increased 20% on the same June to August period last year as the capital continues to thrive despite struggles experienced in other parts of Scotland. Continue reading Capital property market’s strongest summer in a decade
