The year 2011 saw a continuation of high levels of prime properties being launched to the market, with a total of 1,503 properties above £400,000 made available to buy across Scotland. This imbalance
of supply and demand had the effect of suppressing values and they fell by 4.7% by the end of the year, according to Savills own prime market index.

One of the consequences of current market conditions is that buyers of prime property have become increasingly discerning and value-driven, with most expecting to secure a reduction on the asking price. Homes which are realistically priced and well presented to the market should continue to sell, but only those which are also in the best locations will achieve any sort of premium. This is reflected in the differences in prices being achieved for property which is best in class, compared to that which is broadly average for its type.

Realistic pricing, pegged to today’s conditions and without reference to peak, will be required to get many markets moving. It may take two or three years for the current oversupply to work its way through the system. With sellers now accepting offers below asking prices, we expect prime values in Scotland to fall by a further 4.0% over the course of 2012, before gently recovering from 2013. We expect prices to increase further once the balance between supply and demand has been restored, against an improving economic outlook.

Price reductions

Of the total 1,503 prime properties launched on the market across Scotland at £400,000 and above during 2011, 16% had at least one price change. Indeed, many underwent multiple adjustments in an attempt to achieve a sale. The highest number of price changes was in Renfrewshire where 21% of properties were ultimately reduced in price. This is a clear symptom of a sluggish local market; indeed the number of house sales in the region dropped by 15% during 2011.

Death of Offers Over?

Agents operating within the Scottish prime markets are continuing to use the ‘Offers Over’ system as a tool to achieve the best possible price. However, it seems sellers are now recognising that guaranteed bidding wars and premiums far above the asking price are a thing of the past.

At the peak of the market during 2007, 83% of prime properties for sale in Edinburgh were launched at an ‘Offers Over’ price. This figure reduced by only 7% during 2011, demonstrating that it remains the pricing strategy of choice. Selling prices for prime property in sought after locations such as Stockbridge, Inverleith, Trinity in Edinburgh North and Pollokshields and Newlands in Glasgow South achieved an average premium of 25% over the asking price in 2007. This figure reduced to 1% during 2011.

Time on the market

The huge selection of homes for buyers to choose from and their inability to raise mortgage finance have conspired to ensure homes take much longer to sell. At the peak of the market it took an average of 81 days to sell a house across Scotland’s cities. In February 2012 this rose to 231 days. Sellers are now being more realistic in their price expectations and we anticipate prime houses will sell much more quickly in 2012.

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