Spotlight - Spring 2019

SPOTLIGHT Savills Research Residential

Edinburgh’s economic growth The million pound market New build opportunities Overview

Edinburgh made up 37% of Scottish transactions above £400,000 in 2018

Scotland’s residential market remains unfazed by the political uncertainty currently affecting the rest of the country. The number of transactions increased by 2% at the end of last year, supported by a record- breaking prime market. Meanwhile, the official UK House Price Index for Scotland has seen positive annual growth for the last 33 consecutive months. However, what happens next is less clear cut. Our forecasts assume that if Article 50 is extended, it is for a relatively short period and that, ultimately, we avoid Edinburgh’s still a no-deal Brexit. That would give households greater going strong confidence over their future finances, which in turn should A more stable and considered market is expected this year underpin buyer sentiment to support an improvement in Edinburgh remains the jewel of Scotland’s housing Economic growth has increased more over the house price growth in 2020. market, making up 37% of prime and 61% of million last five years than most UK cities, with a higher We cannot rule out a delay in pound transactions in 2018. Transactions above percentage of the working-age population in this should negotiations to £400,000 reached 1,931 during 2018, an increase employment. Edinburgh also has a large proportion leave the EU become more of 12% compared to 2017, as more stock became of workers in high-skilled occupations, such as the drawn out. Meanwhile in the available. Million pound transactions reached 128, finance and insurance sector, which currently makes event of a no-deal Brexit, the the highest since 2007 and up nearly 20% from 2017. up 20% of Edinburgh’s economic output. impact on the housing At 7%, annual price growth in Edinburgh’s prime Looking ahead, we expect a more stable and market will be dependent on market was the highest in the UK according to the considered market in 2019, driven by realistic the Government’s response Savills index. Strong premiums and record prices per pricing. Whilst some buyers are waiting for the to support the economy. square foot continue to be achieved. political dust to settle, there remains a surplus of Despite the uncertainty, The capital of Scotland’s international profile motivated buyers, despite an increase in the number Scotland still has room for and economy underpins its strong housing market. of sellers. growth, particularly in popular, well-connected Residential values annual change forecasts neighbourhoods. In many Scotland has room for further growth, as market sentiment remains positive of these markets, supply falls well short of demand, 5-year so competition will drive 2019 2020 2021 2022 2023 compound growth up values. 14.8% Mainstream UK 1.5% 4.0% 3.0% 2.5% 3.0%

Prime GB 11.9% Regional 0.5% 1.0% 3.0% 2.5% 4.0%

Faisal Choudhry Mainstream 18.2% Scotland Head of Scotland 2.5% 5.0% 3.5% 2.5% 3.5% Residential Research Prime 0141 222 5880 14.2% [email protected] Scotland 2.0% 2.0% 3.0% 3.0% 3.5% Source Savills Research 2 Edinburgh and the Lothians

Whilst some buyers are waiting for the political dust to settle, there remains a surplus of motivated buyers and sellers

Prime hotspots Our prime market analysis of A similar trend was also witnessed last year, mainly due to a lack of Edinburgh covers 10 hotspots that make in the outer suburbs of Barnton, supply below £200,000. However, up the majority of transactions above and where stable an increase in transactions above £400,000. Edinburgh’s inner suburbs second hand activity was offset by a £200,000 led to a 7% annual rise were the star performers in 2018. These drop in new build transactions. in the average transaction price include the Grange, Morningside and last year. area, south of the City Wider Edinburgh market The prime market, especially in East Centre, where prime activity reached Whilst Edinburgh’s prime transactional Lothian and , continued to 399 last year, supported by a strong market increased last year, it was offset rise, with transactions above £400,000 second hand market. by a drop in supply and (subsequently) reaching 470 during 2018, which was was the stand-out area, transactions below £400,000, thus higher than the number in the Aberdeen where prime transactions, mostly leading to an overall 9% fall in area. The increase was mainly due to second hand, increased by 44% from Edinburgh City transactions across all more new build transactions in North 59 in 2017 to 85 in 2018. Neighbouring price bands. Berwick, Dunbar and Haddington witnessed 155 prime However, some areas bucked the in East Lothian and also Bonnyrigg, transactions, up by 20% from 2017, trend, including the second hand market Loanhead and Roslin in Midlothian. supported by new build activity at in the EH3 9 postcode, which includes Interestingly, prime transactional Donaldson’s and Westerlea Gardens. the Quartermile development, and the growth across the Lothians was Meanwhile, prime activity in Trinity, EH10 6 area covering . limited to £700,000, with a drop in and Stockbridge increased Meanwhile, the new build market activity above this level. As a result, the from 144 in 2017 to 182 in 2018. supported transactional growth in average prime transaction price above The central hotspots of the New , and Liberton. The new £400,000 fell by 8%, from £564,811 in Town and West End remained stable build market in also stimulated the 2017 to £519,903 in 2018. last year. Despite an increase in second local second hand market. Whereas activity above £700,000 hand activity, there were fewer new during 2017 across the Lothians was build transactions due to a number of The Lothians widespread, most of the transactions sites reaching completion, resulting in a The overall number of transactions in the in 2018 took place in the East Lothian slight drop in overall prime activity. surrounding Lothians area fell slightly hotspots of North Berwick and Gullane.

Prime transactions at £400,000 and above The market continues to grow across Edinburgh’s inner suburbs

■ 2016 ■ 2017 ■ 2018 450

400 399 378

350 343

300

250

200

159 159 155 150 149 129 £400,000 and above £400,000

100 85 86 67 64 66 58 55 60 59 53 54 51 60 59 50 44 51 45 49 49 52 Number of residential transactions at at transactions Number of residential 42 40

0 Grange, New Town West End Ravelston Murrayfield Trinity Inverleith Stockbridge Barnton & Colinton Morningside Cramond & Merchiston

Source Savills Research 3 Greater Glasgow

Prices in Greater Glasgow grew annually by 5% during 2018 Lack of supply supporting price growth Demand will continue, bolstered by a growing economy

Greater Glasgow includes the city food, sport and education offering Market exceptions area of Glasgow and commuter/ confirms the city’s reputation as a highly Whilst the overall market lacked suburban areas across neighbouring desirable international destination. transactional growth, some price bands Dunbartonshire, Lanarkshire and Despite growing demand, housing bucked the trend. The market above Renfrewshire. supply is intermittent. Current availability £800,000 saw a remarkable performance, Glasgow has experienced economic is 8% lower than last year, which explains with 89 transactions in 2018 compared to growth and development in recent the lack of movement in transactions 71 in 2017. This figure was the highest since years, bolstered by a growing and young between 2017 and 2018. Meanwhile, 2008. The majority took place in Glasgow’s population, and business growth in high- average monthly house prices in Greater West End and Park and also Pollokshields tech and service sectors. Glasgow grew annually by 5% during 2018. and Newlands in the southside. These are exciting times for the city, Moreover, the Savills Prime Index for Activity above £800,000 also increased where Barclays have broken ground the city area of Glasgow increased by 3% in the suburbs of Bearsden, Milngavie, on the new Buchanan Wharf campus during the final quarter of 2018 compared Bothwell and Thorntonhall. However, development on the Clyde, which will to 2017. high-end transaction numbers remained house their technology, functions and As we enter the spring market, unchanged in the suburbs of Giffnock operations team. Once completed, the we anticipate more stock coming on and Newton Mearns. Meanwhile, more campus will accommodate up to 2,500 the market. But a significant spike attainable new build supply boosted the additional staff. in applicants and viewing activity markets between £200,000 and £400,000 Glasgow is the largest retail centre in will continue to put upward pressure in the commuter locations of Lanarkshire the UK outside London and its music, on values. and Renfrewshire. Greater Glasgow market above £800,000 As the wider market remains stable, high-end transactions have increased 120

105 100 89 80 71 64 62 60 54 48 52 43 39 43

and above 40

20 Number of residential Number of residential transactions at £800,000 at transactions 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source Savills Research

Country locations are climbing up Prime transactional performance is now exceeding city locations, driven by realistic pricing

Country locations of Scotland include Scotland’s heartland is now the third of Fife as a whole grew from 36% in the heartland of Fife, Perthshire and largest prime market outside Edinburgh 2017 to 45% in 2018. Other notable Stirlingshire, as well as the Highlands, and Greater Glasgow. Whereas the locations in Fife where the prime market Argyll & Bute and the southern counties markets in Perthshire and Stirlingshire increased included the coastal locations of Ayrshire, Dumfries & Galloway and remained steady last year, prime of Aberdour and Dalgety Bay. the Scottish Borders. The prime country transactions in Fife reached 202 last market continues to grow, enabled year compared to 170 in 2017. Key to this Top performer by realistic pricing and good value growth was the hotspot of St Andrews, Argyll & Bute was the top performing compared to city and urban properties. where the prime market as a percentage country location last year in terms of

4 Aberdeen and the North East

A stabilising market Transactions in commuter areas and certain price bands continue to recover

Residential activity across the Aberdeen dropped by 9% since peaking in July 2018, The wider North East area recovered during the second half when 5,674 properties were available. Overall transactional activity of last year and average prices have With the exception of the market up to across Angus, Dundee, Moray and remained steady in recent months. £100,000, all other bands have seen stock southern Kincardineshire slightly The number of residential transactions levels beginning to ease. Supply is less dropped last year. However, the prime across Aberdeen City and Aberdeenshire saturated above £400,000 in particular, market bucked the trend recording a increased by 2%, from 4,382 during the and this is being reflected in improved 22% increase in transactions. second half of 2017, to 4,483 during the transactional activity in some areas. Increased prosperity in Dundee led second half of 2018. Whilst just over half of the overall stock to prime growth in Angus, mainly in the has been unsold for a number of years, market up to £500,000, with improved Prime market outperforms there are now more realistically priced second hand activity around Brechin The Aberdeen area’s market recovery mainstream properties being launched. and the periphery of Dundee. is being led by the prime market. Prime transactions in Angus Transactions above £500,000 in Outlook for prices increased from 30 in 2017 to 43 in Aberdeen City during 2018 were slightly High stock levels have impacted house 2018, lifting average prices by 4%. higher than the number during 2017. price performance in the Aberdeen area. Transactional activity in Dundee In Aberdeenshire, the second hand However, prices are beginning to find City remained stable last year, despite market between £300,000 and £500,000 their level, with the monthly average in constrained supply below £300,000. and also above £700,000 witnessed a Aberdeen City and Aberdeenshire staying Above this level, transactions increased, modest recovery over the same period. around the £160,000 and £190,000 level which led to a 3% annual rise in average Transactional activity across all price respectively for most of 2018, according prices last year. bands in Aberdeen City’s new build to the UK House Price Index. Further north in Moray, improved market also improved, supported Aberdeen area house prices ended the activity above £200,000 led to a 5% by incentives. year 2018 approximately 4% lower than annual rise in the average transaction 2017. We expect price drops to ease in price during 2018. Stock levels beginning 2019, subject to a further reduction in Whilst the overall market in to peak stock levels. This will enable a recovery southern Kincardineshire around The high level of available stock remains from 2020. Prices will follow a similar Laurencekirk remains affected by the a key barrier to Aberdeen’s long-term trend to the rest of Scotland from 2020 slowdown in the Aberdeen area, the market recovery. Whilst the number is onwards, with 4% growth over the five- second hand market above £300,000 slightly higher than a year ago, it has year period between 2019 and 2023. remained stable.

prime transactional growth, In the south of Scotland, improved of a few parts of Scotland that witnessed attracting lifestyle buyers, many of activity in Peebles and Melrose boosted a rise in transactions during 2018 as a which came from outside Scotland. the prime market in the Scottish whole. This area had its strongest prime The number of transactions above Borders, where transactions above transactional market since 2010, with £400,000 increased from 54 in 2017 to £400,000 increased from 128 in 2017 to 37 taking place in 2018. In contrast to a record 77 in 2018, led by Helensburgh 144 in 2018. The prime markets in the previous years, prime activity in 2018 and Oban. Below this level, the Argyll Highlands and Ayrshire, including the reached into higher price bands, mainly & Bute market saw improved activity in hotspots of Ayr and Troon remained taking place in Dumfries town and its Dunoon and Lochgilphead. steady. Dumfries & Galloway was one surrounding area.

5 Million pound market

Strongest market since 2008 Edinburgh’s dominance grows, but some regional locations are making a comeback

The magic of St Andrews Scotland’s million pound market has enjoyed Greater Glasgow Over the past 10 years, its strongest performance since 2008, with 211 The million pound market across Greater Glasgow last St Andrews has established transactions recorded during 2018. There were 18 year recovered to the level prior to the introduction of itself as the most expensive above £2 million, the highest since 2008. With 128 LBTT, with 31 transactions taking place in 2018. The location for homes in transactions, including 15 above £2 million, Edinburgh majority took place in Glasgow’s West End, Bearsden, Scotland. At £370,000, the continues to dominate. Whereas in 2016 and 2017 Giffnock and Bothwell. Within Glasgow’s West End, average transaction price last there was activity above £3 million, there were no the Kelvinside neighbourhood saw six transactions in year was 39% higher than transactions at this level in 2018. 2018, the highest number since 2006. Edinburgh and more than However, 2019 data already shows a transaction double the level of Scotland. at £3.25 million in St Andrews and, anecdotally, we Aberdeen area While prices per square understand a number of deals have been done above Local market recovery in the Aberdeen area is also foot in Edinburgh are £4 million that have yet to be recorded. Interestingly, being felt at the top end, with eight transactions beginning to reach £800, in of the 211 transactions, only 26 can be classified as during 2018. New build transactions made up half St Andrews there have been ‘country’ houses: with an average of 64 acres per of the number in the city. Aberdeenshire saw two 18 transactions in The Links, country house, privacy is one of the main drivers of transactions, the first such activity since 2016. Across The Scores and Golf Place in demand, especially for buyers from outside Scotland. the wider North East, there were two in Angus, near recent years that exceeded Brechin, with overseas buyers purchasing both. this level, including 12 at Edinburgh £1,000 per square foot and The central hotspots of New Town and the West Regional locations above. The prestigious End recorded the highest number of million pound Scotland’s heartland recorded its highest total since Hamilton Grand development transactions in Edinburgh last year. However, the 2008 with 26 taking place in 2018. This included 14 in has led the way with market remained steady compared to 2017 due to a Fife and nine in Stirlingshire, both of which are record properties selling at up to lack of supply. numbers. Once again, St Andrews dominated the Fife £2,500 per square foot. The strongest growth took place across inner market, including nine new build transactions at The St Andrews attracts buyers suburbs, including The Grange, where transactions Scores and Hamilton Grand. from all over the world who increased from 12 in 2017 to 22 in 2018. In Stirlingshire witnessed one of only three transactions are gripped by the history Murrayfield, transactions increased from 10 to above £2 million outside Edinburgh last year. There and magic of the place. Golf 15 over the same period. Transactions in the EH4 were four transactions in the Scottish Borders, taking is one of the main purchasing postcode, including Stockbridge, increased from 19 place in Melrose and Duns, one of which was above reasons, with the town being in 2017 to 23 in 2018. The outer suburbs of Barnton £2 million. Dumfries & Galloway saw its first million recognised as the ‘Home of and Cramond saw eight transactions last year, the pound transactions since 2015, with three taking place Golf’ and the Old Course highest number since 2007. last year. being arguably the most famous in the world. Million pound residential transactions However, not all the buyers Scotland’s top end records its highest total since 2008 are golfers. Others are drawn ■ £1 million to £2 million ■ £2 million and above 250 to the town for its history, 22 architecture and stunning 18 coastline as well the 200 213 10 193 university, which is the oldest 184 16 7 in Scotland and third oldest in 150 11 10 166 17 9 151 11 the UK. 134 136 9 122 131 100 114 97

50 Number of residential transactions Number of residential 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source Savills Research 6 New build market

New build monthly house prices increased annually by 12% in Edinburgh and Glasgow

Awaiting opportunities Demand for high quality product remains strong in the two main cities

In recent years, Scotland’s new build developments have as well as downsizers. Car parking availability remains a filled supply gaps where the second hand market has been key selling point at developments in central and inner lacking. New build transactions increased annually by 6% to suburban locations. There is demand for more attainable, 14,738 during 2017, supported by an increase in private new mainstream flatted product in Edinburgh, as evident in the housebuilding over the same period. strong rate of sales being achieved at current sites around However, a drop in housebuilding resulted in a 4% annual the City Centre. fall in transactions to 14,128 in 2018. The drop in supply has Demand for new build family housing is being met been felt especially in the main city hubs of Edinburgh and at several sites across the west and south east, where the Glasgow. Between 2017 and 2018, new build transactions in average price per square foot is around the £250 level. Edinburgh fell by 24%, from 1,993 to 1,512. In the city area of The challenge for these sites is to create a sense of place, Glasgow, new build transactions fell by 32%, from 1,578 to with a community feel. 1,074 over the same period. As demand remains ever strong, the average new build Glasgow monthly house price between October 2017 and October The highest prices per square foot in the city area of 2018 in both cities increased by 12%, according to the UK Glasgow are typically achieved in the West End. At present, House Price Index. a small number of sites are marketing, with prices per In Edinburgh, the average went up from £269,186 to square foot ranging from £300 to £500. Some individual £300,286. In Glasgow, the average increased from £161,331 properties in the Park area have achieved closer to £600 to £181,661 over the same period. Looking ahead, there are per square foot. a number of significant sites in both cities due to launch. There is long-term capacity for more high-quality But we expect supply to remain discontinuous, thus keeping developments at this pricing level in Glasgow’s West End upward pressure on values. and also the City Centre, which remains starved of new build supply. Edinburgh Across Glasgow’s southside, a number of new sites have In the post-Quartermile era, there are now a handful of launched over the last year. With prices per square foot sites in central Edinburgh, with prices per square foot now ranging from around £200 to £300, pricing will be key reaching £800, typically attracting downsizers. There are a going forward as more future sites will result in increased number of large sites currently marketing around the centre, competition. Demand for family housing remains strong with relatively affordable prices. At an average of just over on the periphery of Glasgow and locations that have good £300 per square foot, these are attracting first-time buyers access to schooling.

Average monthly new build house price Intermittent supply lifts prices to record levels

£350,000 Edinburgh City Glasgow City Scotland

£300,000

£250,000

£200,000

£150,000 Average monthly new build house price monthly new Average £100,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source UK House Price Index 7 Savills Research We’re a dedicated team with an unrivalled reputation for producing well-informed and accurate analysis, research and commentary across all sectors of the UK property market.

Research Business

Faisal Choudhry Andrew Perratt Cameron Ewer Jamie Macnab Ben Fox Head of Scotland Head of UK Country Head of Scotland Head of Country Head of Edinburgh Residential Research Residential Residential Houses Residential 0141 222 5880 0207 016 3823 0141 222 5864 0131 247 3711 0131 247 3736 [email protected] [email protected] [email protected] [email protected] [email protected]

Ruaraidh Ogilvie Fiona Gormley Carole Mackie Natalie Simpson Head of North East Head of Aberdeen Head of Scotland Residential Head of Edinburgh Residential Residential Residential Development Sales Development Sales 01356 628 628 01224 971 122 0141 222 5886 0131 247 3757 [email protected] [email protected] [email protected] [email protected]

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