Following a strong start to the year, Scotland’s prime residential market witnessed a slight slowdown in demand and supply in the run-up to the election. However, with the results confirmed, activity should recover over the next six months, aided by an expected cut in interest rates this Autumn.
Faisal Choudhry, Director, Savills Residential Research
- Prime transactional activity remains resilient
- Prime prices fall slightly as unsold stock levels continue to rise
- Varying performances across prime city markets
- Prime prices in areas surrounding the two main cities remain level
- Outlook: sentiment expected to improve going forward following the election
Scotland’s prime residential market remained resilient during Q2 2024 with an increase in transactional activity despite little change in values since 2022.
The number of Scottish second-hand net agreed sales above £500,000 from April to June was 18% higher compared to the same period in 2023, in line with prime markets south of the border, according to data provider TwentyCi.
However, a closer look at transactional activity across the wider Scottish market shows a shift in market conditions since the beginning of June, with fewer properties being launched to the market and a drop in agreed sales.
With mortgage rates creeping up slightly in recent months, the market below £500,000, which is more dependent on lending, saw a -10% drop in agreed sales between May and June this year.
Scotland’s prime market is more equity-driven. However, the run-up to this year’s general election resulted in a degree of caution, with some buyers opting to wait and see how events would unfold before firming up plans. Consequently, there was little change in the number of agreed sales above £500,000 between May and June this year, having gone up by 17% between May and June last year.
Meanwhile, a 52% year-on-year rise in prime properties undergoing an asking price change during Q2 2024 and 24% more prime stock sitting unsold at the end of June 2024 compared to June 2023 is a stark reminder of the importance of appropriate pricing to enable transactional activity.
Against a backdrop of unsettled mortgage rates, election uncertainty and high stock levels, prime Scotland prices dropped slightly by -0.4% in the three months to June 2024, having recovered at the beginning of the year. The pressure on prices was mostly felt in the price band up to £500,000.
Prime UK regional prices also fell by -0.4% over the same months, however, prime Scottish prices are only -0.8% lower than a year ago and 15.2% higher than in March 2020 pre-pandemic. In comparison, prime UK regional prices are -2.7% lower than a year ago and 10.1% above the March 2020 level.
Although prices across Scotland’s prime urban and surrounding areas fell at the same rate in the three months to June, they were relatively flat in city areas and sought-after villages.
Whereas prices in the rarefied £2 million-plus Scottish country house market have shown little change over the last year, they were 19.7% higher than before the pandemic. That said, they remain -32.7% lower than their 2007/08 peak. So despite the growth since March 2020, Scotland continues to offer value for money, presenting an opportunity for new buyers.
The prime markets in Scotland’s two main cities have performed differently in recent months. The number of prime transactions in Edinburgh during Q2 2024 was higher than in Q2 2023, however, activity has dipped more recently, mainly in the markets up to £750,000. Here, a combination of increased mortgage rates, election uncertainty and high stock levels contributed to a slight fall of -0.4% in prime prices during the three months to June.
The city and suburban markets of Glasgow have seen fewer prime sales during Q2 2024 compared to a year ago, mainly due to constrained supply. Interestingly, prime properties here are spending slightly less time on the market compared to last year and unlike other areas, unsold stock hasn’t increased dramatically. Consequently, prime Glasgow City prices are 1.3% higher than a year ago, with no change in the last three months.
Meanwhile, in the Aberdeen area, prices this year have so far been flat, a consequence of relatively stable stock levels, especially in the prime market. Although prime sales above £500,000 dropped slightly during Q2 2024 compared to last year, the market up to this level has improved.
Just like Edinburgh City, the prime country markets surrounding Edinburgh also saw more prime sales above £500,000 during Q2 2024 compared to the same months of 2023. Although stock levels have increased, prime prices were flat over the last year, but 21.5% higher than in March 2020, making it alongside York, the top prime regional market since the beginning of the pandemic.
The prime market in Glasgow’s surrounding areas has performed well, with agreed sales during Q2 2024 exceeding the level in 2023 over the same months, mainly up to £1 million. And in a similar trend to Glasgow City, larger properties are spending a bit less time on the market and there isn’t a high level of unsold stock, compared to last year. As a result, prime prices were unchanged over the last 12 months.
The level of unsold prime stock in Perthshire has risen substantially over the last year. Although the number of prime agreed sales is higher than last year, it remains a price sensitive market, with values falling by -2.3% in the last three months.
While the prime markets of Angus and Southern Kincardineshire have seen more agreed sales in the last quarter, it has become an increasingly cautious market recently, with more available stock, leading to a fall of -0.5% in prime prices in the three months to June 2024.
Sentiment across the prime Scotland market is likely to improve, now with the UK election results confirmed and Labour in power. That said, much remains to be seen in terms of specific policies and proposals.
The expectation of a fall in the Bank of England base rate will also come as welcome news and we expect renewed demand from buyers more reliant on mortgage debt to lead to a stronger second half of the year.
More specifically for these markets, Labour’s plans to introduce VAT on private school fees could see more demand filtering into the state school systems which may in turn increase the house price premiums we know are already evident around high-performing state schools.
There is potential for prices to improve over the next quarter as confidence comes back and market conditions stabilise, however, any uplift will be on hold until excess levels of unsold stock start reducing.
< View our latest Q2 2024 updates here.
For more information, please contact your nearest Scotland office or arrange a market appraisal with one of our local experts.