Prime sales volumes pick up across Scotland

Scottish country house prices were virtually unchanged between January and March, rising by 0.1%, Knight Frank data shows.

On an annual basis, prices were up 0.3%. Price growth continues to be constrained by Land and Building Transaction Tax (LBTT), Scotland’s replacement to Stamp Duty. In the three years since its introduction, agents note that its long-term impact has been to make prime rural markets across Scotland more needs-based, with less activity among discretionary buyers.

However, vendors are increasingly taking a more pragmatic approach to asking prices, which contributed to a pick-up in sales over the last year.

Value drives rural markets

Indeed, a flipside to fairly modest price growth in country markets is that some rural properties look increasingly good value. The number of residential sales in Scotland with a value above £750,000 ended 2017 up 9% compared with 2016, despite a slow start to the year, data from the Registers of Scotland shows.

While the majority of sales took place in Edinburgh, there were notable increases in East Lothian, West and Midlothian, Stirling and Fife.

Edinburgh outperforms

Property prices in Edinburgh increased by 3.3% between January and March, the fastest rate of quarterly growth reported by our Prime Edinburgh City Index since its inception a decade ago. The annual change in property values in the city also reached a record high at 7.7%, the highest level of growth of any prime market tracked by Knight Frank.

A shortage of new supply relative to demand is one of the main reasons behind a rise in values across the city.

Transactions increased by 2% last year, according to data from the Registers of Scotland. However, stronger growth in sales volumes was seen in higher price brackets during 2017, with a 16% year-on-year increase in property transactions between £500,000 and £1m, and sales above £1m.

It follows a period of more subdued activity in the prime market after the introduction of LBTT.

While activity was concentrated on central areas in 2017, it has started to ripple out to more suburban areas, particularly towards the west and south of the city, driven by the market for larger family houses in areas such as Murrayfield and Morningside.

Knight Frank data covering the first three months of 2018 suggest that momentum has continued this year. Demand remains strong, with current selling times averaging around seven weeks across all price bands, compared with more than eight weeks at the same point in 2017.

Outlook

Despite the positive sentiment surrounding the market at present, a relative shortage of new homes coming onto the market could also weigh on transaction volumes this year - though it should also underpin values.

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