Fine and Country Scotland Market Report Summer 2024

THE PROPERTY MARKET

A REVIEW OF THE KEY TRENDS IN THE NATIONAL AND LOCAL HOUSING MARKET

SCOTLAND

Analysis by Dataloft

BUILDING MOMENTUM

SALES

28.3% House prices

£277,855 March 2022 vs £282,776 March 2023

55,884 Q1 2023 vs 57,446 Q1 2024 2.8% 25.8% 9.8% 1.8%

sales

82,370 April 2023 vs 90,430 April 2024

48,587 April 2023 vs 61,140 April 2024

New private homes built (completed)

mortgage lending

£16.1 bn* April 2023 vs £20.6 bn* April 2024

Source: ONS, HMRC, Bank of England, DLUHC, HomeLet *Figures rounded to nearest £0.1bn

THE PROPERTY MARKET CONTINUES ITS STEADY RECOVERY. AS MOMENTUM BUILDS, BUYER DEMAND, TRANSACTION LEVELS AND PRICES ARE RISING. ALL EYES ARE ON THE BANK OF ENGLAND FOR AN IMMINENTLY EXPECTED INTEREST RATE CUT.

INTEREST RATES

The UK economy grew by 0.6% between January and March 2024, marking the end of the recession (ONS). With inflation falling to just 2.3% in the 12 months to April 2024, close to its 2% target (ONS), the Bank of England is widely anticipated to cut the base rate imminently. Economists at Capital Economics are forecasting the base rate to be at 4.5% by the end of 2024, with the first cut expected in August. With the economic outlook brightening, consumer confidence in May rose to its highest level since December 2021 (GfK Consumer Confidence Tracker).

MARKET DYNAMICS

Despite borrowing costs being more expensive than the ultra-low period a few years ago, the recent stability has meant that homeowners can be confident in their ability to afford a mortgage and can benefit when rates do fall. With a widely expected base rate cut alongside the usual spring optimism, almost two-thirds of agents say that buyer confidence has improved compared to three months ago (Dataloft by PriceHubble (poll of subscribers)). Mortgage approvals reached 61,140 in April, a significant annual increase of 26% and only the second month since August 2022 that approvals have topped 61,000 (Bank of England).

ELECTION

Rishi Sunak has announced a 4th July general election. Some fear an election could stall market activity, but this was typically when a significant policy change, such as Mansion tax, was mooted, which isn’t the case this time round. The first interest rate drop is expected to have a larger impact on activity this year. The election is unlikely to interrupt seasonal patterns of transactions, which typically peak in July and August anyway (Dataloft (PriceHubble), HMRC). With the sales pipeline already 3% higher than this time last year (Zoopla) it's unlikely that buyers already in the process of working to a sale will pull out.

LETTINGS

£1,294

Average monthly rent across the UK April 2024 7.9%

Average rents April 2023 vs April 2024

SEASONAL RISE

Average rents rose by 1.6% to a new high of £1,294 per month in April, the highest monthly increase since August 2021. Year-on-year rents are up 7.9%, slightly moderated from the highs of 10%+ growth in summer 2023. Rental demand has declined by a fifth over the last year (Zoopla) as temporary pandemic effects fade away and renter affordability becomes increasingly stretched. Despite this, demand continues to outstrip supply and rents are forecast to grow, although at a slightly slower pace than the recent highs. As we move into the typically busier warmer months, 89% of agents report six or more applicants for each listing on the rental market, with a further 55% reporting 11 or more (Dataloft by PriceHubble (poll of subscribers)).

13 AVERAGE TENANT ENQUIRIES PER RENTAL HOME.

NEARLY TRIPLE THE AVERAGE OF 5 IN MARCH 2019

The current period of relative stability has led to homebuyers gaining confidence and moving forward with their moves. With improved buyer choice and mortgage rates being more stable albeit still high, many who had postponed plans are going ahead with their move.

NICKY STEVENSON MD, FINE & COUNTRY UK

POTENTIAL FOR INVESTORS BUY-TO-LET

GROWING YIELDS

Sustained and strong rental growth in recent years has led to rising yields. The average gross indicative yield of a property sold and rented across the UK in Q1 2024 was 5.2%, significantly up from 4.5% in the same period in 20211. Strong forecast rental growth of 19.1% between 2024 and 2028 means that the average property bought today at a 5.2% yield would have an estimated yield of 6.2% by 2028 (assuming today’s capital value).

IMPROVING BUSINESS RATES

The average buy-to-let five-year fixed mortgage rate is currently 4.59%, significantly down from 5.87% in July 20232 . This is likely to further improve when the interest rate is cut, aiding affordability. Despite increasing regulation, sentiment in the sector remains strong. 80% of landlords are planning to either maintain or increase their lettings portfolio over the next 1–2 years, with the primary reason for increasing to build an investment business3

5.2%

average yield 2024, 4.5% in 2021

Source: Dataloft Rental Market Analytics (PriceHubble), Land Registry Q1 2024 vs Q1 2021, average across all property types

19.1% forecast cumulative rental growth in the UK, 2024–2028

Source: Savills, JLL, Knight Frank

4.59% average buy-to-let five-year fixed mortgage rate, 5.87% in July 2023

Source: Bank of England

STRONG INVESTMENT

Property values are up 58% over the last ten years, outperforming the 20% growth of the FTSE 100, solidifying real estate as a reliable long-term investment4. Average capital value growth of 19.9% is forecast from 2024-2028 (JLL, Savills, Knight Frank), alongside strong rental growth. Income security is supported by renters staying longer, an average of 4.4 years in 2021–22, increasing from 3.8 years a decade previously (English Housing Survey).

1Dataloft Rental Market Analytics (PriceHubble), Land Registry Q1 2024 vs Q1 2021, average across all property types, 2Bank of England, 3Dataloft (PriceHubble), Property Academy Landlord Survey 2023, 4Dataloft (PriceHubble), UK HPI, Uk.investing

NATIONAL MARKET CONDITIONS

SUMMER 2024 MARKET

House prices grew by 1.8% in the year to March, stronger than at any time since April 2023 (UK HPI). Detached homes led the way with 2.5% growth year-onyear. A lack of available larger homes for sale during the pandemic years, combined with sharp mortgage rate rises following the mini-budget meant that many movers in this sector delayed moving. Buyers are now returning, driving stronger growth in this sector. Semi-detached homes had the second strongest annual growth at 2.2%. Growth was more muted but still positive for lower priced homes, with terraced houses rising by 1.3% and flats by 1% (UK HPI).

4.0% YORKSHIRE AND THE HUMBER HOUSE PRICE GROWTH TO MARCH 2024

6.7% 3.8% 3.2% 5.0%

Source: Dataloft (PriceHubble), HMRC, ONS, UK HPI (March 2024)

Source: Dataloft (PriceHubble), HMRC, ONS, UK HPI (March 2024)

REGIONAL ACTIVITY SCOTLAND

Transaction levels continue to recover, having climbed to their highest point since March 2023 and up 9.8% year-onyear (HMRC). This indicates a reviving property market, as improving economic conditions help ease household financial pressures. Despite mortgage rates remaining elevated for longer than anticipated, pent up demand alongside the usual seasonal boost is driving increased buyer and seller activity. The market is experiencing a sustained uplift

in sales, with 13% more agreed than a year ago. The sales pipeline is steadily rebuilding, and the market is on track for close to 1.1 million sales in 2024, a 10% increase on last year (Zoopla). Across Scotland, the most active housing markets are currently those of East Lothian, Midlothian and Renfrewshire, where close to one in every 19 properties has changed hands in the past year.

Private Stock Turnover

Less than 4%

4.0% to 4.49%

4.5% to 4.9a9%

5.0% to 5.49% Over 5.5%

Reviving market

Na h-Eileanan Siar

Dataloft (PriceHubble), National Records Scotland, ONS, UK HPI (March 2024) Contains OS data © Crown copyright and database right 2016. %

46.9%

Orkney Islands

PRICE GROWTH SINCE 2019 (%)

Source: Dataloft (PriceHubble), ONS, UK HPI (March 2024 v March 2019)

Source: Dataloft (PriceHubble), ONS, UK HPI (March 2024 v March 2019)

MORE CHOICE

There are a fifth more homes available than the same time last year, the highest level of supply in eight years (Zoopla). The average agent outside of London now offers twice as many 4+ bedroom homes compared to February 2022, whilst there are 25% more three-bed homes available compared to a year ago, promising news for families looking to upsize. Increased supply is giving potential buyers more choice, however affordability is a key factor affecting budgets.

20%

MORE HOMES ON THE MARKET COMPARED TO THE SAME TIME LAST YEAR

Source: Zoopla

PRICE DYNAMICS

Nationally, property values are edging up and the market continues to stand firm. The average asking price of homes being listed for sale on Rightmove has climbed by 0.6% year-on-year, reaching a new high of £375,131. However, the market remains price sensitive, with 62% of offers currently being accepted at up to 5% below asking price, with a further 20% slipping to more than 5% below (Dataloft by PriceHubble poll of subscribers).

2.7%

YEAR-ON-YEAR GROWTH IN THE AVERAGE ASKING PRICE OF A PROPERTY IN SCOTLAND

Source: Dataloft by PriceHubble (poll of subscribers)

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Analysis by Dataloft

Dataloft provides data-driven analytics and insights on housing markets as part of PriceHubble, a global data and technology business. Our team of analysts and data scientists produce the evidence needed by clients for marketing strategies, investment decisions and planning submissions. dataloft.co.uk

Disclaimer: This report is produced for general information only. While every effort has been made to ensure the accuracy of this publication, Dataloft Ltd accepts no liability for any loss or damage of any nature arising from its use. At all times the content remains the property of Dataloft Ltd under copyright, and reproduction of all or part of it in any form is prohibited without written permission from Dataloft Ltd.

Date of publication: June 2024 Analysis, editorial, design, graphics and charts by Dataloft.