CONFIDENCE is growing across the property market, a leading expert has said. Jonathan Rolande said new data released by RightMove, which showed soaring interest on Boxing Day, was matched by green-shoots of recovery in other areas of the sector.
The portal announced this week how, on Boxing Day, there were a record number of homes listed for sale. Rightmove says more than 10,000 new properties came to market, which is the biggest number of new sellers in one day since 2011.
In fact, visits to Rightmove nearly doubled between Christmas Day and Boxing Day. The level of demand from potential home-buyers, measured by the number of enquiries sent to estate agents about homes for sale, jumped too, and more than tripled (+273%) from Christmas Day to Boxing Day.
Mr Rolande, spokesman for the National Association of Property Buyers, said: “There will be many of us working in the property sector who will have raised a glass and toasted seeing the back of 2023.
“The hangover from Liz Truss’ botched mini-budget created huge problems across the market, and it was only through Autumn and Winter that we started to see the first signs of recovery. But, as we kick off the New Year, there are already some green-shoots on the horizon.
“I do sense a shift in the market and there are early signs, albeit fragile, of positivity. Banks have started fighting for mortgage business and are cutting rates to levels we’ve not seen in around seven months. Long may this continue. And, crucially, confidence is rising too among buy-to-let landlords.
“But confidence can only take you so far. There is still a chronic shortage of family homes across far too many parts of the UK. The crazy prices and mass viewings may have gone. But demand still outstrips the supply of decent homes, and remedying this will help to steady prices.
“Rental is still a disaster for too many would-be tenants. Stock is low. Rents are high. And this makes buying a home much more appealing. People I speak to, who know I’m in the industry, are no longer asking if it is the right time to buy. Instead they are asking for tips on finding somewhere to buy.”
Mr Rolande added: “It’s a small but subtle change but it underlines a shift from hesitation to growing confidence.
“As we enter a General Election year I’m increasingly of the view that the Party who best provide the answers are likely to be the ones who secure the most votes at the next General Election. A recovering housing market in 2024 is surely a vote-winner for all.”
Bank of Family support varies regionally and isn’t closely aligned to house price differences – recipients in the East of England are receiving most support (av. £32,100), while those in the West Midlands receive the least (av. £19,800)
Affordability issues are universal but most Bank of Family support goes to urban home purchases (216,500), compared to 100,500 rural homes
According to the survey, just 39% of Bank of Family recipients will benefit from professional advice from a mortgage broker or financial adviser before accepting help this year
Housing affordability is worsening across all UK regions, forcing many aspiring homeowners to depend on financial gifting from relatives – the Bank of Family – to step onto the ladder, according to new data from Legal & General and the Centre for Economics and Business Research (Cebr).
The report reveals that Bank of Family recipients may receive varying amounts of support depending on where they live. Surprisingly, levels of gifting don’t closely align to house price differences – according to the data, borrowers in the East of England are receiving the most support (av. £32,100), while those in the West Midlands receive the least (av. £19,800).
Huge gulf between the UK’s urban and rural markets
The data also indicates that the volume and individual size of Bank of Family gifting varies depending on whether the borrower lives in an urban or rural area. In 2023, the Bank of Family is expected to support the financing of 216,500 urban home purchases. Meanwhile, the number of rural homes bought with support from the Bank of Family will be less than half that total, at 100,500.
Homebuyers in towns and cities are not only more likely to lean on the Bank of Family to buy a home, but they often need to borrow more than those in rural areas. The Bank of Family is estimated to gift £5.7 billion towards urban home purchases in 2023, accounting for 70% of the value of Bank of Family support and more than two-thirds (67%) of the transactions it facilitates.
That equates to roughly £82bn worth of housing in 2023. The average gift or loan size for an urban home is also higher at £26,200, compared to £23,900 for a rural property.
Bank of Family propping up purchases up and down the country, but with huge regional variations
Although house prices appear to be softening, homebuyers are still facing worsening affordability across the UK property market. The Bank of England base rate increased from 0.1% in December 2021 to 5.25% in August 2023, significantly increasing mortgage costs, with the average repayment for a semi-detached house rising by 61% across all UK regions from 2022 to 2023.
These wider affordability currents are reflected in Legal & General’s report, which investigates the amount of property transactions in each UK region that received funding by a loan or gift from the Bank of Family. Buyers in London are by far and away the most likely to receive financial aid from family members, perhaps unsurprising with the average house price standing at almost double the UK average (£534,000 compared to £286,005 in April 2023).
In fact, the survey suggests the Bank of Family supported two-thirds (67%) of recent homebuyers in the capital, more than double the proportion of the second-placed region (the North West at 36%).
Legal & General also recorded the average size of Bank of Family financial gifts across all UK regions.
London, the South East, the East of England and the South West see the greatest contributions from the Bank of Family. However, there is not always a direct correlation between regional house prices and the average size of a Bank of Family gift. The East of England leads the way across all UK regions for the highest average Bank of Family gift or loan at £32,100 despite its lower house prices, trumping even London gifting at £30,000.
Find out more about the regional variation in Bank of Family lending with Legal & General’s interactive map, here.
Kevin Roberts, Managing Director, Legal & General Mortgage Services, commented: “Up and down the country, the Bank of Family is making significant financial sacrifices to help family members onto the housing ladder.
“Support is concentrated in urban and southern areas, where house prices are the highest, but is prevalent across the UK. While a brilliant lifeline for those able to draw on it, many people will not have access to such generosity and this widespread support is indicative of deep, underlying affordability issues affecting the UK.”
Significant gender split in borrowers seeking professional financial advice
Despite the Bank of Family being set to support a record number of home purchases in 2023, Legal & General’s survey also found that many recipients are not seeking professional advice.
Aspiring buyers who draw upon family support largely do not speak to an adviser before accepting family help, with just 39% of borrowers seeking guidance from a mortgage broker or professional adviser during their Bank of Family transaction. More than a quarter (28%) did not seek any advice at all.
Gender also plays a crucial role in borrowers’ decisions to seek professional advice. At 46%, women are far more likely to speak to a professional adviser than men (30%). In comparison, men (42%) were much more likely to depend on advice from friends than women (29%). Overall, 35% of all respondents asked friends and acquaintances who had similar experiences for advice.
Kevin Roberts, Managing Director, Legal & General Mortgage Services commented:“The Bank of Family has not only become a major lender – the ninth largest in the UK if it were a formal entity – but also a significant source of financial advice, with less than 40% of financial aid recipients seeking professional guidance before their transactions.
“The gender dynamics at play are also fascinating. At 46%, women are far more likely to speak to a professional adviser than men at 30%. In comparison, men are much more likely to depend on advice from friends than women, at 42% compared to just over a quarter (29%).
“In such a challenging economic climate, buyers must not overlook the insights that an adviser can bring to even the most complex of property transactions. Failing to do so could prove a very expensive mistake later down the line.”
Read the full report on the Legal & General website here. Find out more about how families can support each other when it comes to homeownership in the Legal & General Guide to Gifting here.
Annual Scottish house price growth now 8.4% – highest in 2022
Average Scottish house price is £220,870,
Second-highest number of May transactions in last 10 years
21 of 32 Local Authorities had rising prices in the month – same as in April
Largest annual increase at 22.6% in Argyle & Bute
17 Local Authorities reached peak prices – 3 more than in April
Scott Jack, Regional Development Director at Walker Fraser Steele, comments:“One would never claim any market is bullet proof but on the current evidence Scotland’s property market remains at the very least in robust form. The rise in interest rates and the increase in the cost of-living are not yet having a marked impact on house price growth.
“The average price paid for a house in Scotland in May 2022 according to our data is £220,870, establishing yet another record price for the country – the eleventh occasion that this has happened in the last twelve months. This price is some £17,100 higher than that seen in May 2021, meaning that prices have risen by 8.4% on an annual basis. This annual growth rate is the highest recorded to date in 2022.
“The market transaction data too is robust – defying any expectations of a slow-down on this evidence. The provisional figure for May 2022 is 9,092 transactions, which is the second highest May figure of the last ten years – the highest having taken place in 2019, being the year before the pandemic struck.
“Ultimately demand is strong, but the supply of desirable stock remains low. Property prices are therefore seemingly more resilient in the face of rising borrowing costs.
“Over and above homebuyers, property remains attractive to investors too as it continues to outperform other assets such as equities, which are affected more acutely by higher borrowing costs.”
Note:The Walker Fraser Steele Acadata House Price Index (Scotland) provides the “average of all prices paid for houses”, including those made with cash.
Table 1. Average House Prices in Scotland for the period May 2021 – May 2022
Commentary: John Tindale, Acadata Senior Housing Analyst
The May housing market
The average price paid for a house in Scotland in May 2022 is £220,870, establishing yet another record price for the country – the eleventh occasion that this has happened in the last twelve months.
This price is some £17,100 higher than that seen in May 2021, meaning that prices have risen by 8.4% on an annual basis. This annual growth rate is the highest recorded to date in 2022, although rates for the ten months from February 2021 to November 2021 inclusive were at the same level or higher – see Figure 1 below – with the blue horizontal line highlighting May’s growth rate of 8.4%.
Figure 1. The annual rate of house price growth in Scotland over the period May 2020 to May 2022 with trendline
On a monthly basis, prices in May 2022 rose by 1.0%, or close to £2,300. This monthly increase is almost double that recorded in April (0.6%), with rates currently oscillating on a monthly basis from December 2021 onward.
As we show on page 4, transactions remain relatively strong, with April sales being at a ten-year high for the month. Data for May sales have not yet fully emerged from the Registers of Scotland, but preliminary figures suggest that the total for the month will also prove to be amongst the highest of the last ten years.
We show on page 5 that high-value transactions are, in general, continuing to occur at record levels in 2022, compared to the previous seven years, with Edinburgh accounting for 50% of all sales in Scotland having a value of £750k or higher.
Transactions analysis
Figure 2 below shows the monthly transaction count for purchases during the period January 2015 to May 2022, based on RoS (Registers of Scotland) figures for the Date of Entry. (May 2022 totals are based on RoS Application dates.)
During the month of May, RoS has been processing further registrations with an entry date of April 2022, which provides us with an update on the number of transactions that took place in the month. The latest total for Scotland during April 2022 is now 8,232 sales, which is the highest number in the month of the last ten years. This suggests that the housing market in Scotland remains resilient, despite the potential headwinds of interest rate rises and the cost-of-living increases, which have been widely publicised in the press.
The provisional figure for May 2022 is 9,092 transactions, which is the second highest May figure of the last ten years – the highest having taken place in 2019, being the year before the pandemic struck.
In general, the peak month for sales in Scotland is August, with an average 9,350 transactions, so we can anticipate reporting on a slow build in the number of properties being sold over the next three months.
RICS (Royal Institution of Chartered Surveyors) in its May Residential Market Survey, is reporting that buyer enquiries are currently negative in Scotland, indicating there is less demand for homes this month, compared to a positive score seen over the last three months. However, RICS also notes that new vendor instructions are similarly lower this month, compared to the previous three months. On balance, RICS believes these two indicators are likely to balance each other out, leaving little change in house prices.
Figure 2. The number of sales per month recorded by RoS based on entry date (RoS applications date for May 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 – May 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 58 sales in excess of £750k during May 2022, and we anticipate that this number will increase as further sales for the month are processed by the Registers of Scotland. It is therefore quite likely that, excluding March 2021, we can report that in every month in 2022 there has been an increase in the number of properties sold in excess of £750k, compared to the same month from 2016 onward. The reason that March 2021 is excluded from the analysis is that it was exceptional, with sales being enhanced since it was the final month in which purchasers could take advantage of the LBTT tax holiday.
The rise in the number of high-value homes being purchased in 2022 is an indication that the “lifestyle changes” associated with the pandemic – “working from home” and the “race for space” – are still strong features of the current housing market. This, as we discuss on page 7, has resulted in strong competition for the properties that meet these requirements, with substantial price rises being seen at the top-end of the market.
The five authorities with the largest number of the 355 high-value sales that have been recorded to date in 2022 are: Edinburgh (179); Fife (21); Glasgow City (21); East Lothian (20); and finally East Renfrewshire (15). It can be seen from these figures that in 2022, Edinburgh accounts for just over half of this sector of the housing market.
Local Authority Analysis
Table 3. Average House Prices in Scotland, by local authority area, comparing May 2021, April 2022 and May 2022
Table 3 above shows the average house price and percentage change (over the last month and year) by Local Authority Area for May 2021, as well as for April and May 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 May 2022. Local Authority areas shaded in blue experienced record average house prices in May 2022.
Annual change
The average house price in Scotland has increased by some £17,100 – or 8.4% – over the last twelve months, to the end of May. This is a £1,500 increase over the £15,600 growth in prices seen in the twelve months to the end of April 2022
In May 2022, 31 of the 32 local authority areas in Scotland saw their average prices rise over the levels seen twelve months earlier – the one exception being West Dunbartonshire, where prices fell by -0.1%. In West Dunbartonshire, it was the average price of terraced properties that saw the most significant fall, from an average £130k in May 2021 to £120k twelve months later.
The area with the highest annual increase in average house prices in May 2022 was Argyll and Bute, where values have risen by 22.6% over the year. Last month we reported on the sale of a 5-bedroom detached home, located just outside Oban, in Argyll and Bute, having an asking price of £485,000, but selling for £600,000. This month there is a further example, with a five-bedroom detached property in Colintraive, overlooking Loch Riddon, having a guide price of £550,000, but being sold for £650,000. Two examples, in the same area, of the way in which competition for homes in remote beauty spots can result in a noticeable increase in average house prices.
On a weight-adjusted basis, which employs both the change in prices and the number of transactions involved, there are five local authority areas in May that account for 44% of the £17,100 increase in Scotland’s average house price over the year. The five areas in descending order of influence are: – Edinburgh (16%), Glasgow (8%); Fife (8%); South Lanarkshire (7%); and Argyll and Bute (5%).
Monthly change
In May 2022, Scotland’s average house price in the month rose by some £2,300, or 1.0%, which is near double the 0.6% increase seen in April. The average price in Scotland now stands at £220,870, which sets a record level for the nation for the eleventh month in succession.
In May 2022, 21of the 32 Local Authority areas in Scotland experienced rising prices in the month, the same number as in April. The largest increase in average prices in May, of 9.6%, was in Stirling, where the average price of detached homes increased from £377k in April to £417k in May. The average price for detached homes was elevated in the month by the sale of a five-bedroom detached Victorian villa in the King’s Park area of Stirling, for £875k, the third-most expensive property of the calendar year.
It is interesting to observe that the bottom four authorities in Table 3 above, which represent the four lowest priced areas in Scotland, have all seen price falls in the month – perhaps suggesting that the competition between buyers for homes is not so intense at the lower end of the price spectrum.
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 May, there are 17 such authorities, three more than in April. We can also add that Scotland itself has set a record average price in May 2022 – the fifth of this calendar year.
Heat Map
The heat map below shows the rate of house price growth for the 12 months ending May 2022. As reported above, 31 local authority areas in Scotland have seen a rise in their average property values over the last year, the one exception being West Dunbartonshire. The highest increase over the twelve months to May 2022 was in Argyll and Bute at 22.6%.
Comparisons with Scotland
Figure 3. Scotland house prices, compared with England and Wales, Wales, North East and North West for the period January 2005-May 202
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–May 2022
Scotland’s Eight Cities
Figure 5. Average house prices for Scotland’s eight cities from February 2021–May 2022
Figure 6. Average house prices for Scotland’s eight cities May 2022
Scottish House Price Index from Walker Fraser Steele
Average house price in Scotland grows by 9.3% over last 12 months
transactions up by 11% on 2019 levels
Average house price up 0.2 in November, now stands at £213, 109
31 of 32 Local Authorities continue to see rising average prices over year to end November
Alan Penman, Business Development Manager at Walker Fraser Steele, comments:“The national growth rate in house prices of 9.3% remains exceptionally high. The ongoing ‘race for space’ continues to support demand for properties that offer the room to live and work in a pandemic environment. Working from home has changed where people want to live and the type of property they want to own.
“The subsequent increase in top-end sales last year has been a result of home movers seeking out properties better suited to their updated needs. Additional support was provided through the tax savings from the Land and Buildings Transaction Tax holiday that was available up to the end of March 2021.
“This encouraged the whole market to be more adventurous. Even now, competition among purchasers, a lack of suitable stock, and the continued very low interest rates supporting affordable mortgage debt means that there is currently plenty of good headwind to sustain prices.
“So while rates of growth in house prices may be stabilising in Scotland, the housing market in November still saw an increase in the average house price of £484, which is 0.2% higher than in October.
“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, but in summary it is fair to say Scottish house prices have enjoyed another strong year often outperforming the UK average.”
Commentary: John Tindale, Acadata Senior Housing Analyst:
“The November housing market Last month we indicated that Scotland’s rate of house price growth was starting to slow, as the annual rate reduced from 13.1% in September to a (revised) rate of 11.5% in October. This month (November), the rate of annual growth continues to reduce – to 9.3% – which represents a modest quickening in the rate of decline from October.
“We would point out, however, that a national growth rate in house prices of 9.3% is exceptionally high, and does not occur particularly frequently. For example, in the 166 months since January 2008, the national growth rate in house prices in Scotland has only exceeded a rate of 9.3% on 10 occasions, with 7 of those occurring during the pandemic in 2021. Historic records would therefore tend to suggest that price growth will slow.
“However, demand for properties with more space remains high. Rightmove reported that on Boxing Day 2021, property searches on their website set new record levels, with Glasgow featuring as the fifth most searched-for location in 2021, while Edinburgh stood in ninth position.
“Competition among prospective buyers for properties remains strong, which is helping to maintain current asking prices. In addition, interest rates remain low on a historic perspective, even if the Bank of England has been dropping hints that rates are likely to move up in the near future.
“In Scotland’s housing market in November, there has been an increase in the average house price of £484 in the month, which is 0.2% higher than in October. The reason for the fall in the annual rate of price growth this month arises from the strong performance in the market twelve months previously, when prices rose in the month of November 2020 by 2.3% – an increase of only 0.2% in November 2021 hence pales into insignificance by comparison.
Figure 1 below shows the movement in annual growth rates over the last 2 years. Although the trendline has a downward track over the final three months of the graph, it ends at a higher level than is currently seen. The answer to the question concerning the direction of travel in house prices in Scotland consequently remains too evenly balanced for a definitive conclusion to be reached.
Transactions analysis
Monthly transaction counts
Figure 2 below shows the monthly transaction count for purchases during the period January 2015 to November 2021, based on RoS (Registers of Scotland) figures for the Date of Entry. (November 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 13,022 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 lost transactions during the spring and early summer months, and also took advantage of the LBTT tax reductions which were on offer 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 14% fall in the overall size of the market. However, looking at the number of transactions for the first eleven 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 totals.
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 977 sales in excess of £750k during the first eleven months of 2021, and we anticipate there will be at least 23 additional sales in November 2021, not yet recorded by the Registers of Scotland and hence not included in the above total. Sales of high-value properties to the end of November 2021 will therefore likely reach 1,000 in number by the end of the month and approach 1,100 by the end of the year. Hence annual transactions of £750k or higher in 2021 will likely double those seen in 2018.
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 23 as yet unrecorded sales being taken into account, November 2021 becomes the second month in a row in which the number of homes purchased having a value of £750k or higher will be lower than that recorded in the same month of the previous year.
Annual change
The average house price in Scotland has increased by some £18,000 – or 9.3% – over the last twelve months, to the end of November. This is a reduction from the £21,800 growth seen to the end of October 2021, and is the second 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 November, Scotland’s growth rate trails Wales’ 9.4% by 0.1%, but in percentage terms is still higher than the nine GOR regions in England.
In November 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 Na hEileanan Siar – but low transaction counts on the Islands often cause unexpected results due to the volatility in the price of the small number of sales – there were just 25 transactions in Na h-Eileanan Siar in November, compared to over 700 in both Edinburgh and Glasgow.
The area with the highest annual increase in average house prices in November was Argyll and Bute, where average prices have risen by 17.8% over the year and by 4.6% in the month. Statistics for the month include the sale of the Ferry Inn House on the Rosneath Peninsula.
The Ferry Inn House was once owned by Princess Louise, the daughter of Queen Victoria. It sold for just under £1 million. The data for Argyll and Bute in November also includes the sale of a further £1 million detached property on the outskirts of Oban, with 11 bedrooms, 5 bathrooms and 17 acres of land.
With these two properties having been sold in the month, it is little wonder that average prices in the area have seen such rapid escalation.
Monthly change
In November 2021, Scotland’s average house price in the month rose by some £500, or 0.2%, compared to a fall of £70 in October. The average price of a home in Scotland now stands at £213,109, which sets a new record level for the nation for the eighth time in the last twelve months.
In November, 20 Local Authority areas in Scotland experienced rising prices in the month, with only 12 seeing prices decline. The largest increase in average prices in November, of 10.2%, was in the Shetland Islands, followed by the Orkney Islands at 7.0%, but as indicated above, Scotland’s Island groups tend to see volatile price movements, due to the low number of sales each month.
On the mainland, Inverclyde saw the largest increase in prices in the month, of 4.6%. This increase in average price was helped this month by the sale of a modern detached home, overlooking the Firth of Clyde, in Gourock, for £650k.
On a weight-adjusted basis, which takes into account both the increase in average price and the number of transactions involved, six local authority areas in November were responsible for 54% of the positive movement in Scotland’s average house price. These were, in order of influence, South Lanarkshire, Argyll and Bute, Perth and Kinross, Highland, Falkirk and Moray. At the opposite end of the scale three authorities were responsible for 60% of the fall in prices in the month, being the City of Edinburgh, East Renfrewshire and East Lothian, with the overall rise in prices outweighing the falls by £484.
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 November there are 14 such authorities, up from 12 in October. In October, it was noticeable in Table 3 that four of the top six local authority areas ranked by price had reached new record levels: however, in November almost the opposite applies, with only one of the top six areas by value having established a new record price. Prices in the other five areas all fell in the month, with semi-detached homes in these areas tending to see the largest falls in average values.
Heat Map
The heat map below shows the rate of house price growth for the 12 months ending November 2021. As reported above, all but one of the 32 local authority areas in Scotland are reporting an increase in their housing values over the last year. The one area with negative growth is Na h-Eileanan Siar, where prices over the year have fallen by -4.6%. The highest increase over the twelve months to November 2021 was in Argyll and Bute at 17.8% with near neighbour East Dunbartonshire being in second place at 16.3%.
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%.
Property professionals are warning that major changes in the housing market in Scotland are afoot as the Covid-19 pandemic significantly alters the way people think about their working environment and the nature of the work-life balance.
The nine-to-five office routine, with a couple of hours of unproductive commute on top each day, is becoming increasingly unattractive and office workers are asking themselves if they actually really need to return to their desks.
It is a question which is being posed too, by some of the most astute names in global business, such as Schroders, JP Morgan and Google, who are all allowing employees to work from home for the foreseeable future.
If businesses such as these are suggesting that the mass movement of people to fixed locations to do their work is no longer necessary, the argument gains strength that it is likely to change the WFH game for everybody.
In Scotland, the opportunity to re-think lifestyle choices has been catalysed by an extraordinary alignment of supply and demand, which has been the traditional, tried-and-tested market driver.
While there has been pent-up demand in cities such as Edinburgh for a number of years now, there has suddenly – since lockdown ended on June 29 – been an unprecedented increase in supply.
This has confounded experts who consistently have emphasised negative aspects and predicted a market crash, ignoring the present, confident market sentiment.
The market “has gone from zero to full ahead in the blink of an eye”, according to Andrew Milne, residential partner in the Edinburgh office of DM Hall, one of Scotland’s largest firms of Chartered Surveyors.
He said: “The flood of supply stems from a number of factors: people who were ready to move in March but were prevented; people who have reflected on their lifestyles and have been emboldened by lockdown and WFH; and those who want more space than is available in cities.
“One of the idiosyncrasies of this market is the disproportionate number of households without children who are keen to move. Parents, of course, are more constrained by schooling considerations. And, unfortunately, lockdown-related relationship breakdowns mean more demand for housing.
“It is clear that having been confined to city flats for several months has loosened people’s ties to their geographical location and, especially if they have been encouraged to work from home, they are seeking a more fulfilling home environment.”
Mr Milne said that there was an abundance of attractive properties in outlying locations such as East and West Lothian and Fife which, while not cheap, have significant benefits if the commute is reduced to one or two days a week.
He said there was also a noticeable uptake of high-end properties in the capital fuelled by returning global Scots unsettled by the pandemic and seeking a sense of home. They have also been swayed, he said, by the technology and comms revolution which means that they can operate effectively from anywhere.
“A lot of activity,” said Mr Milne, “is being driven by people who now do not wish to wait until they are close to retirement to achieve a better work-life balance, when WFH means that they are halfway there now.”
Alasdair Seaton, partner in DM Hall’s Dunfermline office, said: “The activity in the market at the moment is certainly not normal. We are seeing moves which are clearly driven by lockdown-related considerations.
“These include people needing bigger homes if they are going to be working there indefinitely; people who have missed their relatives and grandchildren and who want to be nearer to them; and a substantial movement of people from Edinburgh who want more space, a rural environment or just a bigger property for their money.
“The vast majority of sales are going to a closing date and achieving prices well in excess of their Home Report values. Many are selling without inspection, and very quickly. Again, many of the transactions involve households without children.”
Jennifer Campbell, Head of Rural Agency at Baird Lumsden, agreed that a move to the country was under way, with people looking to establish “the good life” in good time.
She said: “Plot sales have been very popular as many people are finally undertaking their dream of building their own home. Purchasers are generally seeking rural locations on the outskirts of villages offering peace and privacy and a garden office, or the capacity to put one in. Properties with land have always remained in high demand.
“Our lettings department has also been extremely busy and we have a number of registered applicants from the rest of the UK and overseas wishing to return to Scotland to let a prime rural property to provide a suitable environment for home working.
“Purchasers are generally impatient. They want into their dream home now, trepidatious and fearful of another lockdown. The uncertainty has pushed buyers and sellers to be a bit braver and get on with it. It’s a great time to sell.”
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
PROPERTY sales in Edinburgh were up 38% on last year in the final months of summer.
The city’s leading experts, Warners Solicitors & Estate Agents, have released their quarterly review showing that property sales took a significant jump this year compared to the same three month period in 2019. Continue reading Hot summer for Edinburgh’s property market
