PRIME MARKET UPDATEPrime market price growth pauses in Scotland, but demand at the top of the market remains strong.

Rising uncertainty surrounding Brexit and its potential impact on the economy tempered growth in Scottish country house prices over the first three months of 2019.

Values were unchanged compared with December 2018, though on an annual basis they remain 2.3% higher. The prime market in Scotland has outperformed the rest of the UK, where prime values fell 1.8% over the 12 months to March.

Annual growth in Scotland was led by modest increases across the central belt, in the north and in the Borders, according to our Prime

Scotland index. More generally, rural locations within commuting distance of employment hubs have been the strongest performers.

Values have also been underpinned by a shortage of supply relative to demand, as well as the ripple effect of stronger performance in Scottish city markets. Our prime index for Edinburgh shows values have risen by 7.6% annually, making it one of the fastest growing cities in Europe by price.

The number of prime listings with a value above £500,000 outside of Scottish cities was 8% lower in the first three months of the year compared with the same period in 2018 and 23% lower than Q1 2017, an analysis of Rightmove data by Knight Frank shows.

Agents note that a lack of clarity politically has made some vendors more cautious about bringing properties to market, though well-presented homes that are priced to reflect market conditions continue to attract buyers.

Indeed, data from the Registers of Scotland covering the 12 months to January 2019, shows a 23% year-on-year increase in million pound-plus sales.

However, with Brexit leading the headlines and impacting on housing market sentiment, the prime market is driven primarily by needs-based purchasers who are moving for work, schooling or because they require more space.

The relative value on offer in prime Scottish markets compared to the rest of the UK should drive demand in 2019. Average prices remain around 20% off the pre-financial crisis peak in 2007.

KEY FACTS FOR Q1 2019

ANNUAL PRICE GROWTH FOR COUNTRY HOUSES IN SCOTLAND

COTTAGES HAVE BEEN THE BEST PERFORMING PROPERTY TYPE, WITH AVERAGE VALUES RISING BY 3.4% ANNUALLY

THE NUMBER OF PROPERTIES SOLD WITH A VALUE OF £1M AND ABOVE WAS UP 23% YEAR-ON-YEAR (12 MONTHS TO JAN 2019)

PRIME VALUES IN EDINBURGH ROSE BY 7.6% ANNUALLY

2.3%

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FIGURE 1 FALLING PRIME STOCK VOLUMES New listings, £500,000 and above

Source: Knight Frank Research *excluding city markets

Oliver Knight, Residential Researcholiver.knight@knightfrank.com

SCOTTISH COUNTRY HOUSE INDEX Q1 2019

Source: Knight Frank Research

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ANNUAL QUARTERLY

ANNUAL QUARTERLY

FIGURE 2 PRIME SCOTLAND PRICE CHANGEAnnual and quarterly % change

Cottage Farmhouse Small country house

Large country house

Average

3 month 0.0% -0.2% 0.1% 0.1% 0.0%

6 month 0.0% 0.3% 0.4% 0.5% 0.4%

1 year 3.4% 2.0% 2.0% 2.6% 2.3%

Source: Knight Frank Research

FIGURE 3 PRIME SCOTLAND PRICE CHANGE Q1 2019

up to £500k £500k to £1m

£1m to £2m

£2m to £3m

£3m+

3 month -0.3% 0.0% -0.1% 0.5% 0.8%

6 month 0.4% 0.3% -0.4% 1.6% 2.0%

1 year 2.4% 2.2% 1.0% 4.2% 3.7%

SCOTTISH COUNTRY HOUSE INDEX

Important Notice. © Knight Frank LLP 2019 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.

Ran Morgan +44 13 1222 9600 ran.morgan@knightfrank.com

If you’re thinking of moving in or out of Scotland, or would just like some property advice, please do get in touch.

Please contact us for further information

EDINBURGH OUTPERFORMSAverage prices in Edinburgh rose by 0.6% in the first quarter of 2019, taking annual growth to 7.6%. Annual growth has moderated from 10.6% since the end of 2018, an easing which is primarily due to a rise in political and economic uncertainty as the UK’s planned departure from the EU nears.

That said, properties that are priced to reflect current market conditions continue to attract buyers.

In particular, demand for family houses outside of the city centre has been robust, especially in areas such as Murrayfield, Morningside and Newington. As a result, the average value of a house rose 9.2% in the year to March, compared with growth of 5.1% for flats.

Values have also been underpinned by the continued shortage of supply relative to demand, which has been a feature of the market in recent years. The number of listings in Edinburgh was 5% lower in the first three months of the year compared to the same period in 2018 and the figure was 22% lower than Q1 2017.

We expect this supply and demand imbalance to underpin values in 2019, which should help offset the impact of any political and economic uncertainty to some extent.

Banner image: Duchal estate near Kilmacolm