Scotland’s prime market has seen a record number of agreed sales so far this year, with a recovery in prices in some areas as mortgage rates settle. As more properties become available, realistic pricing will remain essential for underlying demand to continue to translate into transactional activity.
Faisal Choudhry, Director, Savills Residential Research
- Strong growth in prime transactions so far this year
- Urban areas lead prime price recovery
- Demand for family homes lifts prices in the two main cities
- Sales increase in some surrounding areas but price sensitivity continues
- Strong levels of underlying demand will underpin prime activity going forward
Scotland’s prime residential market witnessed a strong start to 2024, supported by greater stability in the cost of mortgage debt and an easing in the rate of inflation.
The number of Scottish second hand net agreed sales above £500,000 during the first three months of 2024 was 16% higher compared to the same period in 2023, according to data provider TwentyCi. Following a dip last year, the market above £1 million outperformed with a 24% rise.
Meanwhile, the market below £500,000, which is more dependent on mortgage lending, saw a 9% increase, reflecting the improvement in borrowing rates since the summer of 2023.
In contrast to recent trends, the prime UK market south of the border outperformed Scotland, with a 19% rise in second hand net agreed sales above £500,000 during Q1 2024 compared to Q1 2023, led by London and its surrounding areas.
Nevertheless, the number of prime Scotland sales above £500,000 during Q1 2024 was a first-quarter record, surpassing the levels in the same period of 2022 and 2023 despite little change in values since these years.
But the uptick in prime transactions during Q1 2024 has come at a price, quite literally, with a 36% rise in properties undergoing an asking price change, emphasising the sensitive nature of the current market. With a wider range of available properties in some areas, pressure on pricing will continue.
The impact of market sensitivity on values has been obvious, with prime Scotland prices dropping for five consecutive quarters between December 2022 and December 2023. However, the first quarter of 2024 has seen a slight shift with an increase of 0.2%. This leaves prime Scotland prices -0.5% lower than a year ago but still 15.7% higher than before the pandemic in March 2020.
In comparison, prime UK regional prices were level during the three months ending March 2024 and they are currently -3.8% lower compared to Q1 2023.
Price-wise, prime Scottish properties between £750,000 and £1 million were the strongest performers with a 0.4% rise in the three months to March 2024.
Location-wise, Scotland’s main urban areas outperformed with a 0.6% quarterly rise. However, there is still downward pressure on properties in rural areas with a slight drop of -0.2% in the first quarter of 2024.
Meanwhile, Scotland’s top-end country house market above £2 million remains resilient with prices 0.7% higher than a year ago and almost 20% higher than in March 2020.
Prime Scottish price recovery during the first quarter of 2024 was led by Edinburgh City. Following a -2.3% quarterly drop at the end of last year, prices here rebounded with a 1.1% rise in the three months to March 2024. There have been more agreed sales above £500,000 so far this year, with premium prices being achieved at closing dates for some properties, mainly in the needs-based family house market. There is also more confidence in the million-pound-plus market, however, activity from £2 million to £3 million and above has been challenging.
Whilst prime Edinburgh sale prices have risen, prime Edinburgh rental values were level, as seasonality returned to the market with affordability pressures now having an impact. That said, prime rents are 23.4% higher than in March 2020. But as the market readjusts to a steadier pace of growth, differences in landlord and tenant expectations have widened.
In the west, demand for family homes lifted prime sales activity in Glasgow City and its suburbs, with prices rising by 0.9% in the three months to March 2024. Glasgow City is one of the UK’s strongest performing prime markets, with only one quarterly drop in prices (December 2022) in a record stretching back to December 2012.
Aberdeen area prices so far this year have shown signs of recovery against a backdrop of a stable number of available properties. There has also been an uptick in agreed sales but mainly up to £750,000 with limited activity above this level.
There was an increase in prime sales agreed in the areas surrounding the two main cities during Q1 2024, including a surge in St Andrews. Whilst prime prices in the country areas around Edinburgh fell marginally (-0.2%), there was a slight increase (0.3%) outside Glasgow. However, there continues to be a mismatch here between buyer and seller expectations, with performance dependent on accurate pricing and appropriate marketing.
Prime prices also remained flat in Perthshire, with a challenging sales market so far this year, propped up by modern or completely renovated houses. There is currently little appetite in prime Perthshire for renovations or building projects, with properties presented in turn-key condition attracting good premiums.
Sales activity up to £500,000 across Angus and Southern Kincardineshire has been stable so far this year, with the market above this level yet to gather momentum. Here, prime prices fell slightly by -0.3% in the three months to March 2024, with the expectations of more stock likely to suppress values in the medium term.
Looking ahead, various demand indicators provide cause for optimism, with the number of buyers registering with Savills to find a prime Scottish home 29% higher in Q1 2024 compared to Q1 2023. Furthermore, our latest survey of buyers and sellers shows that commitment to moving home is now at its highest level in over two years, with the majority not deterred by the upcoming general election.
Meanwhile, mortgage rates have come down quicker than expected and inflation appears to be heading towards the Bank of England’s 2.0% target. However, buyers are likely to exercise caution until a bank base rate cut, and therefore a more significant decline in debt costs, is on the horizon. With more choice for buyers, appropriate pricing and a further realignment between buyer and seller expectations will therefore be essential for the uplift in sales activity witnessed so far this year to continue throughout 2024.
Prime Scotland prices will improve as we move into the spring market, recovering over the medium term with price growth of 21% in the five years to 2028. Whilst well-presented properties and family homes in urban areas will outperform, pricing for homes in remote areas and those prime markets where buyers still face greater affordability challenges will remain under pressure.
Prime price forecasts
< View our latest Q1 2024 updates here.
For more information, please contact your nearest Scotland office or arrange a market appraisal with one of our local experts.