Property sales in Scotland increased by 3% in 2016 and was 9% higher than the 10 year annual average, with lack of supply fuelling growth in popular areas, the latest analysis shows.
The growth in sales last year took place despite a drop in mortgage lending and slowdown in the Aberdeen area, according to the report from real estate firm Savills.
The report also says that the lack of supply in central hotspots is fuelling price growth which is now filtering through to Scotland’s heartland of Tayside, Stirlingshire and Fife.
Alongside this growth a reduction in selling times across Scotland’s cities and exceptional monthly off-plan sales rates in Edinburgh and Glasgow are resulting in supply constraints in the new build market.
The report also explains that changed rates of Land and Buildings Transaction Tax (LBTT) is still affecting sections of the market. The market below £400,000 continues to be supported by favourable rates but higher rates continue to affect the £600,000 to £1 million sector.
Within Edinburgh, the central hotspots of the Grange, Morningside, Merchiston, Inverleith and Stockbridge are adjusting to increased taxation, the report says, with more transactions in 2016 compared to 2014. The attraction of good schools continues to underpin these areas, however the market is still catching up in the West End, Ravelston, Murrayfield and Trinity.
Further afield, the market in Barnton and Cramond has also picked up, but only up to £600,000. Whilst transactions in Edinburgh’s New Town above £400,000 during 2016 did not reach the level of recent years, it has bucked the Scottish trend with a recovery in activity above £800,000. This was also the case in Colinton, where the market between £600,000 and £1 million is recovering.
The report also points out that in the surrounding Lothians commuter area there was a 7% annual growth in overall sales last year. This included a 16% annual growth in Midlothian, supported by the new build market. The new build market has also maintained a healthy level of activity in East Lothian and Midlothian above £400,000, whilst transactions at this level in West Lothian were a third higher than 2014.
‘Buyer sentiment across the market is expected to remain sensitive over the next few years as the process to leave the EU unfolds. As a result, we are forecasting a 10% dip in transactions across the UK in 2017. Prime values in Scotland will remain stable in 2017, with the exception of Edinburgh and Glasgow, where price growth will continue to take place,’ the report points out.
‘Transactions and prices in Scotland’s country locations will continue to recover, however, the top end of the market in these areas will remain constrained by the impact of LBTT. The slowing down of growth suggests that sellers need to be responsive to current market conditions and the fluctuations in demand that are expected over the next two years,’ it adds.
‘We expect demand for high quality stock in areas with good schools and transport links to the market hubs of Edinburgh and Glasgow to remain strong. More generally, properties that present opportunities for buyers willing to take a medium term view on pricing will remain popular,’ it concludes.
