While an equilibrium has been reached, with stock levels now more in line with transactions at the higher end of the market, progress is likely to be hampered by the introduction of Land and Buildings Transaction Tax (LBTT) and uncertainty in the lead up to the UK General Election.

Prime Scottish values in city locations increased annually by 5% during the last quarter of 2014, whereas rural areas fell by 1.5% over the same period. This has reflected the wider UK trend, whereby buyers of urban properties continue to be driven by catalysts, such as job relocation or schooling, keeping the market active. Rural buying decisions have been more discretionary.

The prospect of increased property tax at the upper end of the market will mean a more subdued outlook, with Scottish prime values likely to show minimal growth this year (Table 1). As a consequence, there are opportunities for buyers to take advantage of relative affordability, particularly in country locations.

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From 2016 onwards, we expect the prime market to absorb the turbulence of recent political and taxation challenges and to continue the value growth that had been underway prior to the Referendum.

Despite the challenges facing the top end, there is a more positive outlook for the Scottish residential property market as a whole, due to the establishment of three important foundations. These are the introduction of favourable LBTT rates for the majority of buyers, a dissipation of interest rate fears in the short term and the continuation of gradual economic growth.

2015 will be a period of growth across the mainstream Scottish residential property market. The market, which has lagged over the past five years due to the fragile economy and mortgage constraints, is likely to show a strong performance over the course of this year, with a higher rate of growth than the UK as a whole.

Looking further ahead, we expect more conventional market conditions to prevail, with mainstream market recovery fuelling buyer activity further up the market from next year onwards.

Taken from
Spotlight: Scotland's Prime Residential Property Market - Spring 2015