^{▲ Outlying suburbs are gathering momentum}

Prime sales (second hand transactions at £400,000 and above) outperformed the overall residential market, with an 8% annual increase, reaching 3,533, the highest number since the peak of the market in 2007. Much of the prime activity in 2015 took place prior to the introduction of LBTT, which brought higher rates of taxation to the market.

From May to December last year, the number of prime sales was 15% lower than over the same period during 2014. With a shortfall of 34%, the gap was at its widest above £750,000. However, the last quarter of 2015 witnessed a recovery, with more prime sales recorded compared to the last three months of 2014 (Figure 2).

Most regions of Scotland witnessed their strongest prime markets since the peak in 2007. Prime activity in Edinburgh, the hub of the market, increased by 21% last year, reaching 1,329 sales. Prime sales across the surrounding Lothians increased by 25% last year, with almost a doubling in activity in Midlothian alone. Across Scotland as a whole, Stirlingshire saw the biggest growth, with a 36% increase in prime sales. Elsewhere, prime activity in Glasgow, East Renfrewshire and Ayrshire outperformed Scotland overall.

Prime markets across the Aberdeen area, which is being affected by uncertainty within the oil-dependent local economy, continue to be challenging and are very price sensitive. The market is now adjusting, following seven years of phenomenal growth. Prime sales in the surrounding areas of Highlands and Tayside also dropped last year, impacted by the slowdown in activity in the Aberdeen area.

^{Source: Savills Research}

Suburban strength

Scotland’s housing market recovery since the downturn was led by core central locations, including the New Town and Morningside in Edinburgh and Glasgow’s West End. Prime market performance in these locations, as well as in hotspots such as St Andrews, remains robust. Furthermore, demand for family homes in areas with top performing state schools such as North Berwick, Linlithgow, Dunblane, East Dunbartonshire and East Renfrewshire remains buoyant.

We are now noticing market strength spreading from the hubs into traditional suburbs and commuter areas where prime activity has been relatively stable compared to central locations. The year 2015 has witnessed a jump in prime activity in the suburbs of Barnton, Cramond, Colinton, Stockbridge, Murrayfield, Ravelston, Inverleith and Trinity in Edinburgh. Commuter locations such as Eskbank in Midlothian and Aberlady in East Lothian have also seen an improved market. In the Glasgow area, prime sales in Helensburgh, Kilmacolm and Bothwell are recovering following a subdued period since 2011.

Last year also saw price rises in some suburbs, lifting them into the prime market. These include South Queensferry, Cammo, Corstorphine, Craigleith, Broughton, Duddingston, Willowbrae and Liberton in Edinburgh. Similarly, Netherlee in the south side of Glasgow is benefiting from the strength of neighbouring sought-after locations of Clarkston, Giffnock and Newton Mearns.

Prime values

According to the Savills Prime Residential Index, overall values in Scotland remained unchanged, with a slight 0.4% year-on-year increase at the end of 2015. This matches our original forecast of little change in values, due to the impact of higher levels of taxation under LBTT.

Further examination of the Savills Index shows a widening gap between overall property values in city and town locations compared to village and rural areas. For example, values in Edinburgh and Glasgow increased annually by 4.6% and 2.3% respectively during 2015. Values in town locations of Scotland increased by 1.8%. However, across Scotland, there was a fall in values in village and rural locations (Figure 3).

^{Source: Savills Research}

The Savills Index also shows the differential in value change according to price band, particularly since the introduction of LBTT. The additional cost of LBTT led to a drop in property values, mostly between £600,000 and £1 million. On the other hand, the relatively lower rates of taxation below £400,000 resulted in a 4.4% increase in values in this price band, compared to the overall 0.4% Scotland figure (Figure 4).

^{Source: Savills Research}

The Savills Index showed almost no distinction across city, town, village and rural locations in terms of values, with growth seen below £400,000 and a flattening between £600,000 and £1 million.

However, at the top end of the market above £1 million, the Savills Index showed a gap opening, with values in city, country and commuter hotspots experiencing a recovery. On the other hand, values in more remote locations continue to remain suppressed.

Over the course of 2016, we expect the overall prime market to continue to absorb the turbulence of taxation challenges, with values expected to rise by 2% by the end of this year (Figure 1).

Million pound sales

At 194, the number of transactions at £1 million and above in Scotland reached its highest level since 2008. However, 122 sales completed prior to the start of LBTT. In a trend similar to the overall prime market, the number of million pound sales during the last three months of 2015 was almost the same as 2014 over the same period, which demonstrates an adjusting market (Figure 5).

Unsurprisingly, the majority took place in Edinburgh, which accounted for 98 sales. Over in the west, the million pound market in Glasgow continued its recovery following a low level of activity, with nine such sales taking place last year. Renewed activity in some of Glasgow’s sought-after suburban locations also boosted the number of sales in East Dunbartonshire (eight sales), East Renfrewshire (seven sales) and South Lanarkshire (six sales).

^{Source:Savills Research}

Country hotspots

Whilst the hubs of Scotland and prime suburban locations accounted for most million pound sales, 2015 also saw renewed prevalence of local wealth in areas in East Lothian and Fife. In fact, the most improved market last year was in East Lothian, where 17 such sales took place, second only to Edinburgh.

A similar trend took place in St Andrews, which accounted for the vast majority of sales in Fife. There were 10 such sales in the county, the most since 2008. This included ‘trophy’ purchases at the iconic Hamilton Grand development, which overlooks the famous Old Course.

Buyer origin

Our study of the origin of million pound buyers shows a strong comeback from local purchasers, accounting for 81% of sales, driven primarily by prosperity in Edinburgh, Aberdeen and Glasgow. However, this did not mean a significant drop in the number of buyers from outside Scotland.

On a purely numerical basis, buyers from outside Scotland accounted for 36 of the million pound sales last year, compared to 39 in 2014, with little change in the level coming from London and other parts of the UK. International purchasers of million pound properties in Scotland during 2015 included those from New Zealand, USA, Brazil, Hong Kong, Singapore and Monaco.

^{▲ There were a number of ‘trophy’ sales across Scotland last year, including Hamilton Grand in St Andrews}