While the number of Scottish prime transactions above £400,000 fell slightly last year, they still represented an increase of almost 30% since the slump of 2009 and the current level of sales activity is now typical of a normally functioning market. Around 2,200 prime transactions took place in Scotland in 2011, 4% more than the 10-year average.

The improvement in prime market activity is in stark contrast to the Scottish mainstream market where transaction levels have barely risen (0.3%) since the housing market downturn.

There is unlikely to be a significant shift within the mortgage market in the short to medium-term, with cash buyers and the equity-rich playing a disproportionate role in the market, particularly with regard to higher value homes. We expect prime transaction levels to remain consistent over the course of the next two or three years, as long as current economic conditions prevail.

Despite a slight dip in prime transaction levels, Edinburgh continues to be the hub of prime market activity in Scotland with 33% of prime sales taking place within the capital last year. The thriving economic micro-climate of Aberdeenshire, boosted by its thriving oil and gas sectors, has put it in front of Greater Glasgow in terms of numbers of prime sales.

Stirlingshire bucked the trend, with the level of prime sales increasing by 27%. Like the Borders and Fife, this location was particularly badly hit by the downturn and values took a longer time to read just to current market conditions. The average price of these transactions fell from £567,000 to £521,000 and it would seem that more realistic prices have been the key to unlocking this previously challenged market. Meanwhile, East Lothian and Ayrshire saw an increase in the average price, and consequently the level of sales has reduced.

Million pound market

The market for high value homes in Scotland remains challenging, although there were regional variations, including a surge within the Aberdeenshire and Ayrshire markets. There was a slight fall in the number of residential property transactions at £1 million and above during 2011, compared to the previous year.

However, since much of the activity took place towards the end of the year, a disproportionately high number of sales have not yet been registered. In line with normal trends, the majority of £1 million and above sales took place in Edinburgh, representing 45% of such sales, although this figure has fallen back slightly since the previous year.

The greatest adjustment within this super prime market last year was in Aberdeenshire. There were 19 sales at £1 million and above in the region during 2011, an increase of 90% on the year before. While the first £2 million sale took place in Aberdeenshire in 2010, the following year saw six sales over this figure, including the region’s first
£3 million property transaction, despite a Home Report Valuation of only £2 million. This is further evidence of the location’s surging, oil-based micro-climate which is pushing both property prices and transaction levels upwards.

Following a barren couple of years within the £1 million market context, Ayrshire saw six sales in 2011, compared to only one in 2010 and two in 2009. The highest of these sales was Bargany House near Girvan, which sold for £1.9 million to buyers from Los Angeles.

In 2010, 11% of properties that sold for under £1 million, were launched to the market over that figure. This rose to 20% the following year, evidence that buyers are looking for what they perceive to be a ‘deal’, with a further objective of stamp duty avoidance in a cost-conscious market.

Taken from
Spotlight: Scotland's Prime Residential Property Market, March 2012