Prime Scottish sales activity picked up post-summer, although pricing is under pressure due to high levels of available stock. Looking ahead, whilst a possible increased tax burden might impact sentiment, underlying demand for well-presented and realistically priced properties will support transactional growth.
Faisal Choudhry, Director, Savills Residential Research
The upward trend in Scottish residential sales witnessed during the first half of 2024 continued throughout the third quarter. Against a backdrop of an easing in mortgage rates, net agreed sales across all price bands increased by 17% from July to September 2024 compared to the same months of 2023, according to data provider TwentyCi. However, the equity-driven prime market above £500,000 outperformed, with a 30% increase.
Behind the scenes, though, a 47% year-on-year rise in prime properties that had their asking prices changed was key to enabling sales activity. A further indication of prime market sensitivity was also evident in the 23% uptick in sales that fell through during Q3 2024. This figure was well above the rate witnessed in prime regional markets south of the border, where prime sales above £500,000, net of any fall-throughs, outperformed Scotland with a 40% year-on-year increase.
Meanwhile, supply is outweighing demand, and with larger homes spending more time on the market compared to last year, the number of available prime stock is stubbornly high. Having said that, there are early signs that stock levels and time on the market in some urban and commutable country locations are starting to peak.
Nevertheless, with more choice for buyers amid ongoing general market uncertainty, it will continue to be a price-sensitive market.
The fickle nature of Scotland’s prime market is apparent when examining price performance. According to the Savills index, prime Scotland prices increased slightly by 0.3% in the three months to September 2024, having dropped by -0.4% in the three months to June. That leaves them -0.5% lower than a year ago, but 15.5% higher than March 2020 pre-pandemic.
In comparison, prime UK regional prices fell by -0.5% in the three months to September and are -1.7% behind Q3 2024.
Whilst prime prices in some of Scotland’s city areas are under pressure, sought-after towns and village areas outperformed, with prices rising by 0.8% in the last three months.
One of the strongest performing prime UK markets in the last quarter was Scotland’s rarefied £2 million-plus country house market. Here, prices increased by 1.5% in the three months to September, having stayed relatively flat since 2022. Although prices are 21.4% higher than before the pandemic, they are -31.7% 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.
Varying price performances in Scotland’s two main cities has been one of the main features of Scotland’s prime market so far this year.
In Edinburgh City, the number of prime sales in the last three months was higher than a year ago. But the very upper end is being affected by concerns around a possible increased tax burden ahead of the upcoming UK Budget. With more prime stock available compared to last year, an increasing volume of sales in the capital are achieving prices below their Home Report values. Whilst realistic home report valuations are supporting swifter sales, properties requiring modernisation are staying on the market for longer, unless they are priced appropriately. Prime Edinburgh City prices fell by -0.4% in the three months to September 2024, but they are still almost 10% above the pre-pandemic level.
Meanwhile, prime prices in the city area of Glasgow increased by 0.3% in the three months to September, with annual growth reaching 1.2%. Prices have been supported by a limited supply of family homes, especially in the West End. Here, there is now more consideration of space acquired for the money paid. With the upcoming introduction of VAT on private school fees an important factor, buyers are increasingly looking to the south side of the city as an alternative option.
Prices across the Aberdeen area so far this year have been largely flat due to stable levels of stock. There was also an increase in sales during Q3 2024 compared to last year but mainly up to £750,000, with the market above this level subdued.
The number of prime sales above £500,000 in country areas surrounding Edinburgh was higher during Q3 2024 compared to a year ago, particularly in the Lothians and Fife. Here, demand for best-in-class and realistically priced properties has improved, with prime prices increasing by 0.8% in the three months to September 2024.
Prime sales growth in Perthshire was relatively lower compared to Scotland as a whole during Q3 2024. Here, buyers favour energy-efficient homes that are in turnkey condition. Architects and builders are still reporting high build costs, and this is putting a cap on the amount buyers are willing to pay for properties that need refurbishment or extending. Consequently, prime Perthshire prices fell by -0.9% in the three months to September as a result. That leaves them -3.7% lower than a year ago but 10.0% higher than March 2020 pre-pandemic.
The prime market in Angus and southern Kincardineshire remains price sensitive with no change in values over the last three months. That said, the number of sales from July to September was higher than last year, mainly up to £750,000. However, appropriate pricing has been necessary to enable sales activity.
In the west of Scotland, there is ongoing demand for high-quality properties in coastal locations that offer privacy and also country houses with good views, mainly up to £1 million. Consequently, prime prices in the areas surrounding Glasgow increased by 0.3% in the three months to September, which leaves them 1.2% higher than a year ago.
Looking ahead, underlying demand for well-presented homes remains strong, with a 5% annual increase in buyers registering with Savills during Q3 2024 to purchase a prime Scottish property.
That said, the upcoming Budget has overshadowed sentiment in prime markets across the UK, as concern grows around a potentially greater tax exposure. Once certainty around the tax implications of the Budget have solidified, we expect sentiment to improve, particularly among mortgaged buyers who will benefit from an improved lending environment.
Meanwhile, the gap between buyers and sellers on price expectations is narrowing, which will be essential to maintain market activity. Elsewhere, the upcoming removal of VAT exemption from private schools in January may spur further growth in locations with a competitive mix of high-performing state-funded schools.
Ultimately, given high levels of available prime Scotland stock, appropriate pricing will be essential to attract competitive bids and for the uplift in sales activity witnessed so far this year to continue for the remainder of 2024.
< View our latest Q3 2024 updates here.
For more information, please contact your nearest Scotland office or arrange a market appraisal with one of our local experts.