Property prices in Scotland increased by 1.4% in February and by 3.3% annually to an average of £173,862 with five areas recording new peaks, the latest index data shows.
First time buyers are driving the activity across the country while sales at the top end of the market are much slower but overall lack of supply is pushing up prices, according to the Your Move index.
The average property price has now reached its highest level since a surge in March 2015 with strong performance in Scotland’s two biggest cities of Edinburgh and Glasgow, both up 8.4% annually.
The report says that prices are soaring in the two cities due to the lack of housing supply, partly caused by increased investment from overseas buyers as many look to secure affordable student housing.
Prices are also up 12.2% annually, after a 6.6% surge in February, in Stirling, one of five areas to reach a new peak in February, along with Angus up 7.2% annually, the Shetland Islands up 9.4%, South Lanarkshire up 8.2% and Na h-Eileanan Siar up 17.4%.
Prices for flats are leading growth at 5.1% annually, suggesting a growth in first time buyers and the growth is robust in Edinburgh where the price of flats rose 10.8% and Glasgow with a rise of 9.3%. Flats in Edinburgh are driving growth compared to semi-detached and detached homes as housing developers build more flats in and around the city.
The index report also points out that the housing supply and demand imbalance in the two cities has pushed price expectations up which has in turn slowed average selling times for other properties. Together, Edinburgh and Glasgow account for a quarter of all sales in Scotland. Surveyors say this demand is not matched by an increase in supply, with sellers reluctant to put properties onto the market.
Relatively low levels of sales can also distort prices, as in the case of Stirling where the sale of just one £1.7 million property led to a 12.2% average annual increase in prices. Overall, although high value homes are playing relatively little role in the market with just eight sales of houses over £750,000 recorded for February and 18 in January. That’s against 20 and 26, respectively, in 2016 and more again in 2015.
Increases in house prices, meanwhile, are broad based, with 23 out of 32 local authorities seeing prices grow in February, and the same is true on an annual basis. As well as those mentioned, Argyll and Bute with a rise of 12.1% and Dundee up 9.3% grew strongly in the last 12 months.
The report suggests that growth of 8.2% in South Lanarkshire can be attributed to the increased popularity of towns such as East Kilbride, a fast growing area offering affordable living for families and professional couples due to the new build home development in the area. The town has rail links and bus services to Glasgow, Edinburgh and Ayrshire and has seen an economic boost thanks to a number of new businesses in the area.
In areas where prices have fallen year on year the biggest declines have been in North Ayrshire, down 7% annually despite a 1.8% rise in February, East Lothian, down 6%, and the Scottish borders down 4.3%.
‘First time buyers are continuing to drive the market in Scotland, but the window of opportunity opened by interest rate cuts last year may be narrowing. Tight supply coupled with their demand is pushing up prices across the country,’ said Christine Campbell, Your Move managing director in Scotland.