This sector, comprising properties worth £400,000 and more, has outperformed the mainstream housing market and seen a 35% annual increase in activity, reaching 2,860 transactions during the year ending May 2014.
The prime market has been robust from spring 2013 onwards while sales in the mainstream market across Scotland increased annually by 22% across the same period, according to the research from Savills.
The prime market is being boosted by the hubs of Edinburgh, the Aberdeen area and Greater Glasgow, where activity increased annually by 31%, 43% and 44% respectively. Edinburgh was heavily supported by the hotspots of Grange, Morningside and Merchiston and sales in these areas combined increased annually by 26% while sales in the New Town of Edinburgh increased annually by 49%.
Similarly, the prime southern Glasgow suburbs of Pollokshields, Newlands, Giffnock and Newton Mearns experienced a strong market with a 45% annual increase in activity. These areas continue to be supported by top quality education facilities and excellent transport links.
According to Faisal Choudhray, associate director of residential research at Savills Glasgow, the market strength in the core locations of Edinburgh, Aberdeen and Glasgow has spilled out to some of Scotland’s provincial locations, such as Tayside, where prime transactions increased last year by 33% and also the Midlothian area, south of Edinburgh, where prime transactions also increased. The prime markets in Ayrshire and the Borders also improved last year following restrained performance in previous years.
‘Prime values across Scotland have fallen over the last few years due to the high levels of stock available on the market. However, the significant increase in prime sales has created a net reduction in stock levels in some hotspots, resulting in an annual rise of 6% in prime values in Edinburgh and 4.5% in Glasgow during the second quarter of this year. The rebalancing of supply and demand has started in the country locations of Scotland, with values stabilising during 2014,’ Choudhray explained.
‘In previous years, the prime market has seen a reliance on those aged over 50. However, the market in the city hotspots of Edinburgh and Glasgow is increasingly being driven by professionals below the age of 40, comprising around 43% of Savills sales during the year ending July 2014, compared to 30% during the previous year,’ he pointed out.
‘This target market had been somewhat subdued following the housing market downturn, mainly due to affordability issues. However, there was an ever present pent up demand among this age category aspiring to upsize. This upswing is enabling the whole of the market to move again, following low levels of sales during 2011 and 2012,’ he added.
The research also shows that there was a jump in transactions at the top end of the market above £1 million in Scotland, with 143 sales recorded during the year ending May 2014, compared to 119 during the previous 12 month period. However this is still below the 10 year annual average of 155 transactions.
Buyers originating from outside Scotland made up 28% of the million pound market, compared to 26% in the previous 12 month period. The majority of such buyers came from London, with overseas purchasers mainly coming from other parts of Europe, the US and the Middle East.
Edinburgh, the traditional hub of the prime market with a 46% share of this market, saw a rise at the top end, representing 65 transactions during the year ending May 2014 compared to 55 during the previous 12 month period. The Aberdeen, Greater Glasgow and Tayside areas together made up 36% of the million pound market, representing 52 transactions. There were 10 residential sales at £1 million and above across Tayside during the year ending May 2014 compared to seven during the previous 12 month period.
Across Scotland, there was a slight increase in activity at £2 million and above at the end of last year. As a result, there were nine transactions at £2 million and above during the year ending May 2014 compared to seven during the previous 12 month period.
Savills believes that the outcome of the Scottish Independence Referendum next month is unlikely to impact on purchasing decisions for those intending to remain in Scotland or buyers with strong Scottish connections.
‘Until the close of the spring market, there had been a significant increase in the number of people from London looking to take advantage of the record gap between house prices in London and Scotland. But as the Referendum date draws nearer, we are beginning to notice a lack of commitment from such buyers with purchasing decisions being put on hold until after 18 September,’ said Choudhry.
‘In the event of a decisive No vote at the Referendum this September, we anticipate the end of current uncertainty boosting consumer confidence in the housing market. We predict Scottish prime values potentially rising by 2% at the end of this year, with five year growth up to 2018, matching UK Prime Regional growth as a whole,’ he explained.
‘In the event of a decisive Yes vote we expect the current uncertainty to continue, particularly in relation to tax and currency issues, restricting significant price growth for a number of years,’ he added.
