Prices in Edinburgh’s prime property market increased year on year by 10.6% in 2018, the highest level of annual growth for more than a decade, the latest analysis shows.
Properties valued above £2 million recorded the strongest price growth in the fourth quarter, with values up 3.5% between October and December, the data from Knight Frank’s Edinburgh City index also shows.
Meanwhile, sales volumes above £1 million in the city were 12% higher than at the same point in 2017 and this robust activity is underpinning strong price growth overall.
The report also reveals that properties are selling faster, with the average time taken between a property first coming onto the market and it reaching a sold status 12.5% lower than in 2016.
‘A key factor underpinning recent strong performance over the past year in Edinburgh has been a notable increase in activity levels, particularly within higher price bands,’ said Oliver Knight, Knight Frank residential research associate.
‘In the main, the data suggests that Edinburgh has been less affected by the political uncertainty impacting other prime markets in the UK. No market likes uncertainty though and, in recent months, as the planned date for the UK’s withdrawal from the European Union nears activity in prime markets has started to moderate which could weigh on transaction volumes in early 2019,’ he explained.
It means that Knight Frank is forecasting that the prime market in 2019 in Edinburgh will outperform the rest of the UK in the same market sector and Edinburgh is now one of the best performing prime markets in Europe.
The report shows that sales volumes between £500,000 and £1 million have also been robust, though in recent months they have slowed slightly in a sign that recent political uncertainty is starting to weigh on some sectors.
It explains that the prime market has been underpinned, in part, by a release of pent-up demand following a prolonged period of fairly subdued performance as the market adjusted to changes to property taxation as well as political uncertainty.
Indeed, during the period between 2010 and 2018 annual price growth in Edinburgh averaged just 1.4%, according to our index. The pick-up in demand also means properties are selling faster.
Analysis by Knight Frank looking at the average time taken between a property first coming onto the market and it reaching a sold status shows average time on market in 2018 is 12.5% lower than in 2016. By comparison, the same measure shows that time on the market in the East of England, the South East and London has climbed more than 30%.
However, news that the Scottish government plans to increase the additional LBTT rate for second home purchasers and buy to let investors from 3% to 4% of the total purchase price, could weigh on sentiment and demand in 2019 with property taxes in Scotland already higher than across the rest of England and Wales.
‘As has been the case with previous pre-announced tax increases, we may see a modest spike in activity ahead of its introduction in late January,’ Knight pointed out.
‘Thus far, the prime property market in Edinburgh appears less affected by the political pressures which have been weighing on prime markets across the rest of the UK. No market likes uncertainty, however, and it’s not inconceivable that some buyers and vendors, especially discretionary ones, will choose to sit tight as the planned date for the UK’s withdrawal from the European Union nears,’ he added.
‘This could weigh on transaction volumes. Our forecast for prime regional housing markets across the UK is for just 0.5% growth in 2019 and cumulative growth of 8.2% between 2019 and 2023, though we expect Edinburgh will continue to outperform this,’ he concluded.