Asking v selling price
Prime values across Scotland have fallen by around 20% since the peak of the market, according to the Savills Prime Property Index, following the credit crunch and subsequent crisis in buyer confidence.
However, the continued disconnect between supply and demand suggests that prices in certain areas must experience a further fall of around 10%, if the entrenched glut of Scottish prime housing stock is to be reduced, and a sustained recovery is to get underway.
This is further demonstrated by our analysis of a sample of 2,000 prime properties launched on to the Scottish market during 2011/2012. This revealed that the average price at which prime properties actually sold (£580,373) was 9.4% lower than the average original asking price (£640,398).
We have observed a gulf between cities and their surrounding secondary locations. For example, whereas in the Glasgow city area, the average selling price was only 6% lower than the average original asking price, in Lanarkshire and Renfrewshire it was around 14% lower.
Similarly, whilst Edinburgh’s average selling price was 8% lower than the average asking price, West Lothian is sitting at 16% lower. The average selling price across Tayside was also 16% lower than the average asking price. Prices will need to be significantly reduced before these areas see a recovery.
The process of price correction has already begun, with a 48% increase in instances of sellers and their agents reducing asking prices last year. Assuming this trend of price reductions continues, we anticipate prime property stock levels will fall to around 900 over the next two years, supply will balance with demand and gentle growth in prime values will occur. Savills forecast for the prime market in Scotland suggests an overall 9% price increase between 2013 and 2017.
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