Scottish house prices resilient in face of tax disruption

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• Scottish house prices up 10.3% since May 2014 – twice the annual growth seen in England & Wales
• But 2.1% monthly correction in wake of new LBTT in May, with only one £1m+ home sold in two months
• Home sales down 10% month-on-month in May, following the pre-LBTT spike of top-end transactions
• Glasgow house prices finally surpass 2007 levels, reaching new record of £146,286 after high demand

Christine Campbell, Your Move managing director in Scotland, comments: “Two months into Scotland’s new transaction tax regime, and the impact of the overhaul is still reverberating around the property market.  Meanwhile a sweeping political transformation in May – both in Scotland and the rest of the UK – was a fresh source of uncertainty for those considering the best time to move home.  These winds of change have buffeted buyers and sellers, and it’s harder to make out the underlying course of the market as a result.

“Yet the trends that can be gleaned are positive. Scottish house prices are up by more than ten per cent on an annual basis, and the sentiment from buyers in our branches is upbeat as the stability of the housing recovery shines though. There is no denying that the recent tax turbulence has affected property prices in the shorter-term, with the latest monthly dip testament to further shock-waves of the LBTT, as the market continues to absorb the change. May’s monthly fall of 2.1% (equal to £4,000) is the largest backwards step we’ve experienced for nearly six years. However, this must be considered in the context of following an exceptional leap in March, when prices soared a record-breaking £16,000 as a result of frenetic movement at the top-end of the housing market, with 84 properties worth £1million or more changing hands before the stamp duty switchover. But since the new regime was enforced, there’s been only one million-pound home sold in Scotland in the past two months, which is reining back current measures of growth.  During May, it was the most expensive parts of Scotland that saw average property prices slip backwards, in absence of some higher-value sales – for instance, house prices in Edinburgh have dropped 5.7% since April, while East Lothian saw an 11.2% monthly drop in May. 

“But overall, the downwards correction we’re seeing in May has not undone the progress that’s been made so far this year – in the midst of all this disruption, Scottish house prices have up 7.6% since January (£12,747).

“In another sign of the strength at the core of the housing recovery, May also marks a considerable breakthrough for our second city – with average house prices in Glasgow finally exceeding their 2007 housing boom high, and reaching a new peak of £146,286 in May 2015. Tenacious demand for homes has been the key driver propelling prices out of the shadow of the financial crisis, and Glasgow has seen the most property sales in Scotland in 2015 so far – accounting for 12.5% of all activity in the housing market. The average price for a flat in the city has risen from £105,000 in 2014 to £120,000 in 2015. 

“Lower official transactions figures in May are another symptom of the LBTT, with many sales rushed through beforehand earlier in the year, and disrupting the usual seasonal pattern.  There was a 15% spike in home sales in the immediate run-up to the introduction of the new tax. In contrast, there were just 7,386 sales in May 2015, 10% lower than April levels as activity returns to normal, and starts to iron out the recent discrepancies. With the vast majority of Scottish homebuyers likely to be budgeting less than £254,000 – and so benefiting from reduced transaction costs under the new banding - activity should soon settle back into its natural stride once more.”