Savills: Headroom for more growth in Scottish residential property market
The furlough scheme which has protected jobs and earnings, as well as cheaper mortgages and a benevolent approach to short term arrears by lenders, has meant the residential sector has been the star performer of the Scottish economy after it reopened following the initial Covid-19 lockdown, the head of residential research at Savills has said.
Faisal Choudhry presented his latest findings to an audience of 400 real estate specialists at Savills Scottish Property Outlook this week.
He said: “Market activity has been exceptional since the summer of last year, particularly in the prime market where agreed sales above £500,000 are 67% above the pre-pandemic average, according to data provider TwentyCi.”
Annual house price growth in Scotland during the third quarter of 2021 was 12%, compared to 10% across the UK.
He added: “We have experienced a market that is driven by practicalities rather than by forced sales or economics. A desire for more space both indoors and outdoors, with a separate space to work or study, has fuelled demand. As a result, the number of agreed sales in Scotland increased by 35% between July and December last year compared to 2019, according to data provider TwentyCi. That momentum has continued this year, with agreed sales so far 13% higher than the number prior to the pandemic in 2019.”
Faisal said the low level of homes being launched by sellers is leading to price rises: “Potential homeowners have been reluctant to sell in the current market. Many are experiencing delays in appointing tradespeople to present their homes in market–ready condition. Others are put off by the lack of choice on the market when it comes to buying their next property. This vicious circle means more buyers are chasing fewer properties, leading to competitive bidding and strong offers.”
As has been well-reported, the pandemic brought a ‘race for space’ and a resurgence in demand for country living. Indeed annual house price growth in more remote locations like Argyll and the Borders is now sitting at around 20%, according to the official UK House Price July 2021 Index. However, Savills latest survey of buyers and sellers reveals that, since the end of lockdown, the roll-out of the vaccination programme, and the re-opening of cities, the market is becoming more balanced.
From young professionals to downsizers, buyers are once again choosing to live close to family and friends as well as near places of work and leisure. Indeed, city house prices increased annually by 8% in Edinburgh and 14% in both Glasgow and Dundee during July this year, according to the official UK House Price Index.
Savills latest survey explored buyers’ and sellers’ commitment to moving and found there to be further pent-up demand in the medium and longer term, with lack of available stock on the market being the key barrier to buying.
Mr Choudhry concluded: “The supply and demand imbalance points to further headroom for price rises. However a gradual rise in interest rates and the prospect of increased taxes may temper growth levels in the longer term. This supply/demand imbalance underpins our forecast of 9.5% annual growth in Scottish house prices by the end of this year, led by city and suburban locations around Edinburgh and Glasgow.”