Activity building in Scotland’s country property market but supply remains tight

Lockdown and a seasonal winter slowdown brought the growth experienced in Scotland’s country market during the second half of 2020 to a halt, with average prices down by 0.7% in the first three months of 2021.

It left the Prime Scottish Index up 0.1% in the 12 months to March 2021, with prices supported by a busy period following the reopening of the market on 29 June 2020.

Annual price growth peaked at 0.8% in December 2020, driven by demand for larger family homes from domestic buyers, and second-home purchasers attracted by the Scottish rural market’s relative affordability compared with England. 

Easter traditionally marks the start of the Scottish spring market for rural property, and while activity is building, it has been delayed due to the added complication of home-schooling, which only ended in full this month.

This has left Scotland facing an imbalance between supply and demand. While new prospective buyers increased by 28% in Q1 2021 compared with the five-year average, in the number of sales instructions were down 11%.

In March 2021, there were 21.4 new prospective buyers for each new sales instruction in Scotland. The ratio, which shows strength of demand versus supply, has been climbing steadily since the start of this year and peaked at 21.9 in February. February’s figure was the highest since December 2019 when it stood at 40.7.

“We’ve seen a return to more traditional seasonality in the Scottish market this year following the pandemic in 2020. April’s been a key turning point and I’ve been out to see a good mix of stock, but supply will be constrained initially,” said Tom Stewart-Moore, head of Knight Frank’s rural business in Scotland.

Market valuation appraisals in Scotland’s country market increased by 48% versus the five-year average last month, which should lead to instructions and an increase in stock in the second quarter of the year.

Offers accepted in Scotland’s rural property market over the past few months have continued to convert into transactions, with exchanges in Q1 2021 up 72% versus the five-year average.

The volume of Land and Buildings Transaction Tax (LBTT) revenue received by Revenue Scotland was above average in January and February as buyers sought to capitalise on the duty holiday introduced last July ahead of the 1 April deadline. Returns peaked in the week starting 21 March 2021 and were up 112% compared with 22 March 2020.

While the LBTT nil rate threshold has now returned to £145,000 from £250,000, the impact of the removal of the saving, which was up to £2,100 per property, is unlikely to have a material impact on activity in Scotland’s prime property market.

The reopening of the economy, with the hospitality sector trading again from the 26 April, should provide a platform for increased activity in the country’s property market during the second quarter.

Photo by Caroline Hall on Unsplash