An extraordinary year
2020 has been an extraordinary year. Indeed, in the context of the property market, it can be compared to no other.
To fully appreciate the current position though, one has to consider where we have come from. In the past ten years we have seen the global financial crisis followed by various referendums, coupled with a punitive property tax system. You would be forgiven for thinking that the Scottish property market had been all but washed away. However, the reality of the last three years paints a different picture. The resurgence of the markets in Edinburgh started a wave of activity through the east; meanwhile the changing landscape in Glasgow paved the way for a new way of thinking and a greater desire to make that long-awaited move that many had put off.
A shortage of supply coupled with increasing demand saw a record-breaking year in 2019 for transactions above £400,000 across Scotland. The pace in the market continued in the first quarter of 2020 and, at the point Covid-19 struck, the market was performing exceptionally well with high levels of demand building in anticipation of the spring launch.
So, what happened next?
Lockdown and the closure of the Land Registry could have enforced a total freeze on transactions being agreed. However, even in the most severe circumstances, we saw some surprising activity. New ways of working and an increase in digital presentation saw a small number of sales being agreed, and missives concluding, despite no physical viewing taking place. That said, transaction activity during the lockdown period in Scotland was severely suppressed, with the overall number during the first six months of this year 39% lower than the first six months of 2019. Consequently, it is difficult to put an accurate estimate on house price movement between April and June due to the lack of transactional evidence.
As lockdown eased in England we were lucky enough to view the dress rehearsal for what was about to happen in Scotland. It became apparent that, despite early predictions of a drop in house prices, buyers had other ideas. A huge increase in viewing numbers, both virtual and physical, led to record levels of viewings, enquiries and deals agreed for the month of June in England. This set the tone for the Scottish markets reopening in July.
The big question on everybody’s minds was very apparent. Is it a good time to sell, and what were the prospects and challenges for buyers?
The month of July saw record sales across the UK and indeed in Scotland. The first week of reopening saw viewing numbers up 255% on the average levels seen in Q1 and 300% up on the same week last year. Equally impressive numbers the following weeks were reflected in a 157% increase on Q1 and over 200% increase on the same week last year. This explosion of activity led to a record month for Savills in Scotland, with more than twice as many deals agreed compared with the previous year and the competition for houses delivering incredibly positive sales prices, in many cases over and above expectation. While the exact figures from Land Registry are yet to be released, one data provider suggested that the number of properties in Scotland that were classified as ‘Sold Subject to Contract’ during July 2020 was 54% higher than July 2019.
Where are the buyers coming from and what are they looking for?
It has been well documented that through the months of May and June, Savills received a 70% increase in enquiries from buyers with London addresses looking in Scotland. The pressures of lockdown and the realisation for many up and down the UK that their existing homes were not practical places to both live and work has driven a dramatic change. The top three priorities in buyer demands had shifted, with gardens, home offices and wi-fi speeds now top of the list. The affordability of Scottish property also became a factor, as many plan to work from home in the future, so the requirement to live in expensive city locations closer to the office seemed less important and access to open spaces and country walks more appealing.
As a result, we have seen a surge in country house sales up and down the country, but also an increase in city sales in Edinburgh and Glasgow. These two cities are being appreciated for the proximity to coastal getaway locations such as North Berwick, the East Neuk of Fife and in the west, Helensburgh, Loch Lomond and the extended Argyll coastline. The previous demand for houses close to school catchments remains, but is now twinned with the incredible new volume of lifestyle buyers entering the marketplace. This has led to continued, heightened activity through August, a traditionally quieter month which this year has been anything but.
In summary, there has never been a better time to sell and buyers should be prepared to compete for their preferred homes. Ideas of there being knock-down prices due to Covid-19 are yet to materialise and, whilst the research may not have suggested house price growth be a feature of Q3 2020, I would anticipate some surprising results when the figures are released.
So, what next?
Looking ahead, in the short term, the extent to which market conditions improve will depend on the wider economy. Correct pricing will remain crucial with the backdrop of financial uncertainty. While the conservative research may have predicted house prices in Scotland by the end of 2020 to be 7.5% lower compared to 2019, we remain more optimistic. Moreover, with a continued expectation of price growth over the next five years, we can see the demand and the continued under supply supporting our market, even through the inevitable tougher climate that will follow as the economy falls into recession. Furthermore, large parts of the market looked good value in the run up to the current crisis; this should underpin Scotland’s housing market as buyers place more weight on long term lifestyle choices than on short term investments.
Cameron Ewer is head of residential sales at Savills in Scotland and has 15 years’ experience in handling residential property transactions.
Cameron has specialised in buying and selling some of the best country houses across the UK, as well as bridging the gap into high-end city sales in Glasgow. Specific skills apply to Waterside property, £1m plus and off market transactions. Cameron is also experienced in the development of individual private residences from conception to completion.
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