News Review: Scotland


English cash buyers boost Scottish top end by


Stuart Pender, partner, Lomond Capital


it’s not just the vibrant property market in the south east of england that is shoring up house prices, sales of £1 million homes soared in Scotland last year mirroring the current situation in england. Last month’s report from


Bank of Scotland shows that 148 properties worth £1m or more changed hands north of the border in 2010, 45% up on 2009. as in the south east of


england, it is the nation’s capital that is the key growth driver with edinburgh accounting for almost half of Scotland’s £1m sales. that means there were more homes sold in the top bracket in this part of the world than anywhere in the uK outside the south east of england. a not insignificant 70 properties were sold for at least £1m in edinburgh last year, accounting for 47% of million pound sales in Scotland. the next highest tally was in aberdeen, where ten properties were sold at £1m or more. Homes of that value were sold in three quarters of local authority areas in Scotland, even in a mortgage market that remains significantly subdued. of course, concentrating


on the top end of the market can paint a skewed picture of the real situation on the ground for many people. For example, sales of homes valued at less than £250,000


rose by just 5% over the same period. and despite last year’s upturn, million pound property sales in Scotland were still 40% below the level prior to the onset of the credit crunch in 2007. the resurgence of the


upper end of the market in Scotland has benefited from strong demand from wealthy buyers from outside Scotland - ironically many cash buyers originate from the south east of england - and limited supply. But for most of the rest of the Scottish property market, demand remains subdued.


Cash is king cash is certainly king with the proportion of homes sold to cash buyers doubling in the past five years, according to the council of mortgage Lenders. its figures show that four in 10 properties sold in January went to someone who did not need mortgage funding, up from 18.7% in June 2005. it is not surprising that half


of the £1m-plus sales have been in edinburgh, a major european capital city and destination. But that does not disguise the fact that the number of homes sold in the city dropped 12.1% in the past year, new figures from the registers of Scotland reveal. the average price of a


home during the first three months of 2011 was also down 4.1% on the same time last year, to £203,278, according to the roS. there is no real mystery to


why this is the case, it’s the same as elsewhere – shortage


of mortgage funding at the levels many home-hunters require, plus an unstable and even declining economy. news concerning interest


rates seems to change every day. one minute we are told that they will remain at record lows because of weaknesses in the economy.


“The upper end of the market in Scotland has benefited from strong demand from wealthy buyers outside Scotland”


the next we are told that they must rise before the end of the year to counteract rising inflation with energy prices set to rocket. this uncertainty makes planning difficult for those homeowners thinking of upgrading or those hoping to take that first step onto the property ladder. there is some good news around, especially for first- time buyers. in the past couple of weeks new incentives and mortgages of up to 95% loan to value have been launched by clydesdale Bank, Skipton and the nationwide. naturally the rates on


low-deposit mortgages are considerably steeper than for other deals and it remains to be seen whether in such uncertain times prospective buyers decide to keep their hands in the pockets, which brings me to the lettings sector.


Lettings tightening lending criteria coupled with a squeeze on wages and rising prices have led to more people deciding to rent rather than buy. this has boosted rental yields across Scotland but especially in edinburgh with the Scottish private rented sector reporting that edinburgh rents were up 3.5% to £766 in the first quarter. the average two bedroom home in the capital now costs £694 a month to rent, up 4.5% from a year ago, due largely to demand from frustrated would-be buyers. one in six two bedroom


homes in edinburgh is let out within a week of being made available and half are filled within a month. the cost of renting a four bedroom home in edinburgh has jumped 5.4% to an average of £1,418, reflecting burgeoning demand from families who have sold their homes and are continuing to rent rather than buy a new property. the granite city remains


the costliest place in Scotland for renting with the average property hitting £907 a month, following a 5.7% leap in prices over the past 12 months. So the short to medium term for buy-to-let investors or those seeking to rent out their properties is particularly bright. the only blot on the Scottish landscape is in glasgow where rental prices have fallen. the average rent for two bedroom properties fell 1.5% to £595 in the first three months of the year.


mortgage introducer JUNE 2011 25


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