Edinburgh saw steady growth in its prime property market in 2016

Despite another year of political uncertainty and changes to policy, the prime market in Edinburgh has once again proved relatively buoyant with prices up by 0.5% between October and December.

Annual growth in the city market was 2.6% in 2016, the latest data from the fourth quarter index from real estate firm Knight Frank also shows.

Sales under £500,000 accounted for 55% of all Knight Frank sales over the course of the year and transaction volumes were 20% higher in 2016 compared with 2015.

The index report says that steady, rather than spectacular growth, has been the story of the year, with higher levels of property taxation and economic uncertainty acting as a brake on further price increases.

It explains that the introduction in April of a 3% LBTT surcharge for additional homes was the third major change to property taxation in Scotland since December 2014, while the UK’s vote to leave the European Union in June temporarily dented buyer sentiment.

But despite these headwinds, activity in the Edinburgh market has continued apace. Agents noted that much of the sales growth was driven by demand for good quality townhouses valued up to £2 million in the city centre and for smaller flats across the city. The latter have proven particularly attractive among investment buyers, as well as owner occupiers.

The report also explains that higher purchase costs mean that above £1.5 million in suburban locations, buyers are more price conscious, although some deals are still being completed. In some cases, prices have had to adjust accordingly and that is reflected by weaker price growth at the top end of the market.

‘The Edinburgh market has proven to be fairly resilient to both political events and shifts in policy over the last year. But there has been a real flight to quality among buyers, either in terms of location or specification,’ said Edward Douglas-Home, head of Edinburgh City sales at Knight Frank.

‘As a result, a shortage of suitable properties for sale is among the biggest challenge facing the market as we head into 2017,’ he added.

The majority of prime activity over the course of the year took place in the core central locations of the New Town, the West End, Inverleith and Stockbridge.