Scottish housing market stabilises after buffeting from tax and politics

But experts have been quick to describe the development as a correction in the market following the convulsions brought about by the new rates of property tax (LBTT) introduced in Spring.

With the early months of 2015 being driven by a “considerable volume” of higher value sales brought to the market to beat LBTT, which was introduced in April, the market is now evening out again, according to data just released by Your Move/Acadata.

The authors said tales of a new period of hyper-inflation in the Scottish housing market based on the year’s earlier figures were wide of the mark and latest Office for National Statistics (ONS) data for Scotland actually show a small decline in average house prices.

The £1 million market clearly boomed at the start of the year before slumping to very few sales in April and May and then rising again to six sales in June.

The evening out of the market resulted in monthly property price growth hit 2.6 per cent during June.

Home sales also rallied during May with a 25 per cent rise, the highest monthly total since July 2014, while Glasgow saw the strongest jump in sales activity in Q2, up 18 per cent in the past year on the back of a flats boom.

Transaction levels were up in June year-on-year, but, generally, transactions have flat-lined over 2015, suggesting a slowing down of the sharp rise witnessed over mid-2013 to late 2014.

Rettie & Co’s Director of Research, Dr. John Boyle, said: “These latest statistics show that the housing market in Scotland is stabilising, after a period of solid growth for around 18 months from mid-2013, and adjusting to quite marked political events and changes. We anticipate stronger market recovery over the next year or two due to improving economic activity levels, consumer sentiment, bank lending and new build activity.

“This also applies to the £1 million market, which dropped off substantially over April-May this year and a very strong start to the year.

“The sharp rise in average house prices at the start of 2015 has now been tempered with the market adjusting to the nerw rates of property tax. Average price growth for the year as a whole is a modest 1% or so and we expect that to pick-up a little over the year.”

Christine Campbell, Your Move managing director in Scotland, comments: “The LBTT front-loaded sales into the start of the year, and activity dragged its heels throughout April and May, with the General Election adding to the dampening effect. In Aberdeen sales of detached homes fell 39 per cent between March and April. But June saw a nimble 25 per cent month-on-month leap in home sales, flying high above what we would typically expect for this time of year, and 5 per cent up on June 2014. Overall, Scotland saw 9,265 home sales during the month – the most activity since July 2014.

“During the second quarter of 2015, flats have seen the most significant year-on-year increase in sales, climbing 7 per cent. This stems from the stamina of the first-time buyer market, as this property type tends to be the most affordable for those getting their first footing on the property ladder. This is especially the case in the cities, and Glasgow and Edinburgh accounted for 45 per cent of all Scottish flat sales during Q2 2015.

“But affordability is the biggest steer to Scottish housing market at the moment. At £200,000, the average price of a flat in Edinburgh is more than one and half times as much as the cost of the typical flat in Glasgow (which stands at £120,000). As a result, Glasgow has experienced the strongest jump in house purchases overall, with Q2 sales up 18 per cent on 2014, while Edinburgh sales have seen just a 2 per cent upswing over the same period. Low interest rates, competitive mortgage deals, and higher average earnings have caused a swell of confidence and buyer demand – particularly in cheaper areas – but a drought of supply will keep the floodgates open to stronger price surges, and along with a future base rate rise, this could wash away options for aspiring buyers.”