Edinburgh prices hit new high driven by buyers’ appetite for more space

Property values in Edinburgh increased by 2.3% in the three months to September. This was the strongest quarterly increase since Q2 2018, pushing the Knight Frank Edinburgh City Index to its highest point since inception in 2008. Values were up 4% on an annual basis in the third quarter.

With no spring market this year, and lockdown providing people with time to reconsider their lifestyles and property needs, Edinburgh saw record activity during Q3 after the release of this pent-up demand. In the period from the market reopening on 29 June this year in Scotland to 22 September, all-time records were set for instructions for sale, viewings and offers accepted in Edinburgh, Knight Frank data shows.

Although record instructions were received the amount of property coming to market could not match the increase in new prospective buyers registering with Knight Frank. While the number of prospective buyers for each new property has narrowed - from 16.5 in the first week after the market reopened to 9.4 at the end of September – this imbalance has created upwards pressure on values.

“I’ve never seen anything like it. Once lockdown was lifted there was an explosion in activity and it’s been an extremely busy summer that has seen the return of competitive bidding on sought after properties,” said Edward Douglas-Home, head of Scotland residential at Knight Frank.

Family houses with gardens have seen strongest demand, while at the other end of the scale flats that lack their own private entrance or outdoor space have seen more moderate growth after lockdown (flats were up 1% in the three-months compared with 3% for houses).

While values grew across the board, properties priced at £1.5m to £2m and more than £2m saw quarterly price growth of 4.6% and 6.9% respectively in Q3.

The prime suburban market, predominately Victorian-era homes outside the city centre have benefitted from people’s pursuit of more space since lockdown, with competitive bidding seen due to limited supply. Residential south Edinburgh, including the areas of Morningside and Merchiston, benefitted directly with values in the area up 3% in the three months to September, making it the best performing area of the city.

Higher value properties have also proved more palatable to buyers moving to Edinburgh from outside of Scotland. From June 2017 to May 2020, 43% of buyers in Edinburgh were from outside Scotland.

However, the summer’s momentum shows signs of tailing off, with a wave of local lockdowns in place. In the week ending 24 October appraisals for sale, offers made and viewings all slipped behind the five- year average, suggesting demand is moderating.

While new prospective buyers registering with Knight Frank were up 62% against the five-year average in the week ending 24 October, this margin has narrowed each week for the past month.

As in England, Scotland has a tax holiday in place, with the Land and Buildings Transaction Tax suspended on the first £250,000 of a property purchase until 31 March 2021, and this should support activity into the new year.