Prime Scottish sales have picked up post-summer, with prices holding steady. Looking ahead, the market will continue to be supported by cash purchases. But with more choice for increasingly discerning buyers, appropriate pricing is now essential to maintain the rate of agreed sales
Faisal Choudhry, Director, Savills Residential Research
Affordability pressures facing the wider housing market over the summer have impacted demand for prime properties across Scotland. According to data provider TwentyCi, the number of second hand net agreed sales above £500,000 during Q3 2023 was -12% lower than the same period in 2022. But to be fair, prime Scottish activity was at its peak during Q2 2022, prior to last September’s mini budget and subsequent mortgage market disruption.
Meanwhile, UK prime regional markets outside London saw a -27% year-on-year drop in net agreed sales during Q3 2023.
Net agreed sales in Scotland between £300,000 and £500,000 during Q3 2023 were -6% behind the number during Q3 2022.
Despite these falls, the number of Scottish net agreed sales above £500,000 during Q3 2023 was almost double the pre-pandemic average for the same quarter between 2017 and 2019. And while the market slowed somewhat in July and August, there was a recovery during September, led by the city markets of Edinburgh and Glasgow and their surrounding areas.
While post-summer prime demand has picked up as mortgage rates begin to settle, there is no let up in new supply, with 35% more second hand Scottish properties above £500,000 available at the end of September 2023 compared to the same month last year. With a wider choice of properties in some areas, it remains a sensitive market, especially in price bands more exposed to higher costs of borrowing.
Prime Scottish transactions may have softened this year; however, prices have held steady in the three months to September 2023, leaving them just -1.1% down year on year. On the other hand, prime regional prices outside London nudged downwards for a fourth consecutive quarter, leading to an annual fall of -5.2%.
Even though some of the price gains of the past few years have been eroded, the prime UK market is underpinned by deep reserves of equity and relatively constrained stock levels in many locations, with September 2023 prices 10.5% up on March 2020. But in Scotland, which emerged later from the pandemic restrictions, prime prices are 16.1% higher than in March 2020, making it the strongest-performing region in the UK.
However, a two-tier trend is emerging within Scotland, with prices for properties up to £750,000 witnessing a drop as there is greater exposure to affordability pressures at this price point. Meanwhile, demand from cash buyers for a limited supply of best-in-class properties has supported the market above this level. Scotland’s country house market in particular, which offers relatively good value, particularly against a wider UK context, has seen prices increase by 0.7% in the three months to September 2023.
Prime prices across Scotland as a whole may have been flat in recent months but there are local variations. In the prime hub of Edinburgh City, prices slipped by -1.0% in the three months to September, leaving them -3.9% lower than a year ago. But this was mainly concentrated in mortgage-reliant price bands below £750,000. The family house market on the other hand up to £1.2 million continues to be resilient.
Over in the west, the city market of Glasgow experienced growth of 0.3% in the last quarter. But a two-tiered market is emerging here too, with higher-value houses that offer more space attracting cash-rich buyers, many from outside Scotland. However, a constrained supply of family homes in the West End and Park District is driving buyers to commutable country locations around the city that play to the established hybrid working trend, including Ayrshire, Argyll and Stirlingshire, where prime prices were flat in recent months.
The prime country markets around Edinburgh saw the most robust growth of any Scottish location, with prices increasing by 0.5% in the third quarter. Here, a limited supply of well-presented homes above £1.5 million is driving the market in the hotspots of East Lothian and St Andrews.
Prime prices in Perthshire fell by -0.9% over the last three months; however, turnkey, energy-efficient and contemporary properties continue to attract the most interest.
While prime prices in Angus, Dundee and southern parts of Kincardineshire fell by -0.5% in the last quarter, sales above £350,000 in the Laurencekirk area were steady, with a slight pickup in the Broughty Ferry area of Dundee.
In the North East, prices in Aberdeen City have yet to find their level, although prime sales activity in the sought-after Cults and Bieldside suburbs was steady. Meanwhile, prices in surrounding Aberdeenshire are stable, with an uptick in prime sales in the Banchory area.
Strong levels of underlying demand provides cause for optimism. From July to September, the number of buyers registering with Savills to find a prime Scottish home was not only 3% higher than Q3 2022, but also 71% up on the same months in 2019.
Furthermore, our most recent research of prospective buyers and sellers of prime property revealed that commitment to move was stronger than at the back end of 2022.
But there are still concerns over market uncertainty and the wider economic outlook, even though mortgage rates are beginning to settle with inflation on its way down. The gap, therefore, between mortgage-reliant sectors of the market and those driven by cash will continue to widen.
As buyers are now highly selective and discretionary in many parts of the market, realistic pricing is essential to enable transactional activity. Having said that, a demand versus supply imbalance for appropriately priced and well-presented homes will continue to support prime prices in Scotland’s sought-after urban and accessible country locations.
< View our latest Q3 2023 updates here.
For more information, please contact your nearest Scotland office or arrange a market appraisal with one of our local experts.