It has been a year of adjustment for Scotland’s prime property market with further changes to property taxation and wider economic uncertainty affecting prices.
Prices fell by 0.4% between October and December and year on year prime prices are 1.1% lower although activity levels remain robust, according to the latest index report from real estate firm Knight Frank.
LBTT property tax continues to be the biggest barrier for buyers while Brexit has added to a climate of uncertainty but despite this, Knight Frank sales volumes in the year to November were equal to the same period last year and 12% higher than in 2014.
According to Ran Morgan, head of Scotland residential at Knight Frank, she slight annual fall comes as prices continue to adjust to higher purchase costs following changes to property taxation in both April 2015 and 2016.
And he pointed out that June’s vote to leave the European Union has added to a wider climate of uncertainty, although its impact on the market has been limited so far. Indeed, the number of transactions completed by Knight Frank in the first 11 months of the year was equal to that of 2015 and 12% higher compared with 2014.
There was also an 8% increase in the volume of new buyer enquiries over the same period and a 19% increase in viewings, suggesting that confidence is starting to pick up.
‘The recent weakness of the pound has made the estates market more compelling for international investors. Concerns over political uncertainty also appear to be abating,’ Morgan, explained.
He pointed out that prices remain more than 20% below the previous peak of the market in 2007 and combined with currency fluctuations and higher capital values elsewhere in the UK this can make prime Scottish property look relatively good value.
‘In spite of the wider political and economic uncertainty, and the potential for further changes to the way rural property is owned and managed from the Scottish Government, we expect to see a similar level of activity in 2017,’ he added.
According to Morgan larger income generating estates with land are expected to attract the highest level of interest, as are smaller country homes within commuting distance of large cities.
However, sensible pricing remains key, especially for properties valued between £600,000 and £1 million which are especially sensitive to the higher rates of Land and Buildings Transaction Tax (LBTT).
