The latest on the residential sales and development market in Edinburgh.
2 mins to read
WHAT’S HAPPENED TO PROPERTY PRICES?
Values rose 6.2% in the year to April 2019 and are nearly 30% higher than they were five years ago, according to the UK House Price Index. By comparison, house prices across the UK have risen 1.2% annually and by 26% over the past five years. In the prime market, values grew by 4.3% over the 12 months to June 2019. Outperformance here reflects an ongoing imbalance between supply and demand, which has been a feature at the top end of the market in recent years.
ARE SALES VOLUMES ALSO RISING?
Fewer sales took place in 2018 compared with 2017, in line with the trend seen in the wider UK market, as political and economic uncertainty has risen. Much of the decline can be explained by a drop in sales activity of homes priced at up to £200,000 (where a significant proportion of transactions typically take place). Above this level, the market has been more resilient. There were 1,085 sales in Edinburgh above £500,000 during 2018, for example, up 12% year-on-year.
IS DEMAND LIKELY TO PERSIST?
The Edinburgh City Housing Strategy identifies demand for between 38,000 and 46,000 new homes in Edinburgh over the next decade. While the supply of new homes has picked up in recent years, analysis of planning data suggests there will be a mismatch between this demand and planned supply. The number of new completions fell 11% during the year to September 2018, for example. Consequently, there was also a 12% fall in the number of new build transactions in 2018 compared with the previous year. Even so, sales of newly built homes remain 28% higher than in 2015 and 52% above levels reported in 2014.
WHAT ABOUT FUTURE SUPPLY?
There are around 2,250 residential units currently under construction on larger schemes (10+ units) in Edinburgh, analysis of data from construction data provider Glenigan shows. Some 88% of these are within schemes of more than 100 units, and 68% have more than 200 units, indicating developers are likely to stagger the delivery of homes over a longer time period. There are a further 1,789 residential units with planning in and around the city centre that have not yet started.
WHAT DOES THE FUTURE HOLD?
Knight Frank forecasts indicate residential property prices in Scotland will rise 10.3% over the next five years. Although there are risks to the downside in the short-term, given political and economic uncertainty, there is also potential for urban areas to outperform and, after sluggish growth for several years following the financial crisis, Edinburgh is well-placed to capitalise.