What next for Scotland?
Following the UK’s vote to leave the EU, there is likely to be a period of uncertainty in the short-term.
4 min read
Following the UK’s vote to leave the EU, there is likely to be a period of uncertainty in the short-term as the country waits for a firmer plan on how the UK and Scotland will proceed politically and economically.
The overall residential market in Scotland remains robust, with a 4.6% increase in average property prices over the year to June (according to the latest UK House Price Index). Meanwhile, figures from the Registers of Scotland show that sales volumes in the second quarter rose to a six-year high, up by 4.9% annually.
Oliver Knight of Knight Frank Research noted that transactions have been boosted by government incentives like Help to Buy, “while a favourable economic environment across the UK has meant buyers have been able to take advantage of a sustained period of low interest rates and the availability of competitive mortgage deals”.
Mr Knight also said that increases in the Land and Building Transaction Tax (LBTT) from 1 April on additional dwellings, such as second homes and buy-to-let properties, also contributed to an increase in transactions during the first three months of the year as some buyers and investors brought forward transactions.
In the prime market buyers remain price sensitive as a result of higher purchase costs following the introduction of the LBTT in April 2015. Knight Frank’s prime index for Scotland shows a 0.6% fall in prices over the year to June 2016.
According to Mr Knight “a degree of uncertainty surrounding the outcome of the EU Referendum dampened sales activity as well as prices at the start of 2016”. But he also noted that Knight Frank’s analysis shows “traditional hotspots and commuter locations managed to buck the trend”. In Edinburgh prime prices were up by 2% over the year to the end of June, “with interest coming from homebuyers and investors,” he said. “Good quality flats and houses in the city centre have been in the most demand over this time.
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The EU referendum is the latest in a string of events in recent years to affect the Scottish property market - the global financial crisis and resultant recession, the independence referendum and the plunge in oil and gas prices. Still, it is only over the last 12 months that political and legislative factors have had a more noticeable impact. Though the hike in LBTT on additional dwellings in April this year was followed by a pronounced fall in sales of £1m-plus homes, more recent data from the Registers of Scotland shows transaction levels returning to pre-LBTT levels. It appears that the market is adapting to the new environment, with increased cost being factored into both asking prices and offers. Edinburgh remains the hub for such sales, accounting for 56% of all £1m -plus transactions over the last year.
In the wake of political and economic climate, there is likely to be a period of short-term uncertainty as the country waits for a firmer plan on how the UK and Scotland will proceed.
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