1. Prime sales activity remains in positive territory
2. An increasingly price-sensitive market
3. Demand for family homes and energy-efficient properties continues
4. Strong long-term growth prospects

1. Prime sales activity remains in positive territory

Demand across the equity-driven prime Scotland market has remained resilient in recent months, in the face of challenging economic headwinds that have had a deep impact on the mortgage-dependent mainstream market.

Following the tumultuous ‘mini-budget’ and ensuing mortgage market disruption at the end of September last year, there was a rise in property deals that fell through between October and December 2022 compared to the same period in 2021. However, this was more profound outside Scotland.

Indeed, the number of Scottish net agreed sales above £500,000 during the final three months of 2022 was on a par with the level in the same – albeit febrile – period of 2021 and 59% higher than the same months between 2017 and 2019 before the pandemic, according to data provider TwentyCi.

In the rest of the UK however, the number of net agreed sales above £500,000 during the final three months of 2022 was 34% lower than Q4 2021 and 12% higher than the same months between 2017 and 2019.

Whilst Scotland has outperformed the rest of the UK in terms of prime sales activity, properties are spending slightly longer on the market compared to last year, though underlying demand for well-presented and appropriately-priced family homes continues.

Nevertheless, the prime Scotland market will not be completely immune to the uncertainty facing the wider housing market, with softening demand and increased price sensitivity expected in 2023.

2. An increasingly price-sensitive market

Market sensitivity was apparent in the performance of the Savills prime Scotland index during the final three months of 2022. The impact of economic uncertainty, rising living costs and higher interest rates led to a slight quarterly fall of 0.7% in prime prices during the last three months of 2022. This was the first drop since 2015, when Scotland’s Land and Buildings Transaction Tax was introduced. Despite the drop, prime prices finished the year 3.3% higher compared to the end of 2021.

In comparison, prime prices outside London fell by 1.4% in the three months to December, with annual growth sitting at 2.2% at the end of 2022.

Meanwhile, Scottish mainstream prices fell by 3.4% between the third and fourth quarters of 2022, according to Nationwide.

Prime properties in Scotland’s urban and surrounding areas both witnessed an equal quarterly drop of 0.7% in prices at the end of 2022. That said, over the last two years, annual growth in village and rural areas has consistently outperformed the city and town locations they surround, as country living still remains popular. This also chimes with our most recent survey of prospective buyers and sellers of prime property. When asked what type of location is most attractive, the majority of aspiring buyers opted for small towns, villages and the countryside.

3. Demand for family homes and energy-efficient properties continues

Whilst prime Scotland prices witnessed a quarterly drop, there are variations across different markets. For example, prices for family homes in Edinburgh’s Grange, Morningside and Merchiston area and Glasgow’s West End, southside and suburbs with sought-after schooling have been stable as demand here is outweighing supply.

However, it has become a ‘needs-based’ market, with interest from discretionary buyers softening across higher price bands in country locations. The market for flats that are reliant on mortgage lending has also been challenging, with a drop of 1.6% in prime prices between the third and fourth quarter of 2022.

With higher running costs putting pressure on budgets, there is increasing demand for relatively smaller and energy-efficient homes in country locations, particularly in the Perthshire hotspots of Dunkeld, Strathtay and Aberfeldy.

In the Aberdeen area meanwhile, the prime market continues to recover, mainly up to £600,000 led by the AB15 postcode that includes Bieldside and Cults. Outside the city, there was a rise in transactions in the Stonehaven, Ellon and Alford area as well as the southern Kincardineshire locations of Laurencekirk and St Cyrus.

Across Angus and Dundee, prime prices and the number of prime sales remained steady over the last three months of 2022 compared to the same period in 2021.

4. Strong long-term growth prospects

There is no doubt that economic uncertainty and a tougher lending environment will result in reduced activity and prices, especially in those markets which are most exposed to a higher cost of borrowing. The majority of Savills buyers in Scotland use cash or equity so this could go some way in insulating the prime market here against economic pressures.

The fact that long-term commitment to moving home remains strong, with 75% more buyers registering with Savills in 2022 to buy a Scottish property compared to 2019 before the pandemic, provides cause for optimism. However, buyers are less likely to offer the types of premiums paid over the last two years.

The chronic supply/demand imbalance of well-presented homes in the most sought-after locations will cushion the prime market from significant price falls with prime Scottish prices at the end of 2023 expected to be 5% lower compared to the end of 2022, having gone up by 16.3% since the beginning of the pandemic.

Looking further ahead, the prime Scotland market will remain robust as the value gap and quality of life, alongside the strength and depth of Edinburgh and Glasgow’s economy, means there’s more capacity for growth, and we expect the markets here to outperform the overall prime UK market over the next five years.

< View our latest Q4 2022 updates here.


For more information, please contact your nearest Scotland office or arrange a market appraisal with one of our local experts.