Scotland had the weakest figures for new buyer inquiries of any nation or region in the UK during February, according to the Royal Institute of Chartered Surveyors (RICS).

The number of properties being put on the market was also down, for the fourth consecutive month, with most commentators pointing to the lockdown restrictions for slowing the market, whilst expecting a return to more activity once these are fully lifted.

The only region that was weaker for selling instructions was Yorkshire, and the only part of the UK with weaker price growth was London.

Agents noted there was strong demand for properties in more rural areas of Scotland, particularly, Elgin, Fraserburgh, the Borders and Dumfries and Galloway, where the lack of supply was driving quick sales.

Given our strength in short-term property finance in Scotland, we have noted more flats coming onto the market as private landlords sell, in what has become a slightly over-heated market.

It is also apparent from the conversations I’ve been having with brokers, that professional investors and particularly those looking for refurbishment opportunities to add value, appear to be keeping their powder dry and waiting for a return to more realistic pricing levels.

A wider view of the market

The Covid-19 pandemic and the various lockdown measures taken by the different governments have combined to have a hugely negative impact on virtually all sectors of the economy.

The unemployment rate between October and December 2020 hit 5.1%, which is the highest level for five years, and most experts agree that the on-going furlough scheme has ensured that this figure is much lower than it would otherwise have been.

One sector of the economy which so far seems to have remained impervious to the impact of the pandemic – in fact to have thrived on at least some aspects of it – is the UK housing market.

According to figures released by the Office for National Statistics (ONS), house prices in the UK went up by 8.5% in 2020, the highest annual rate of growth since 2014, and by the end of the year the average house price had hit a record £252,000.

There was a fairly unanimous view among experts that the market would cool down in 2021 once the stamp duty holiday, which was introduced in July 2020 to kick-start the housing market, came to an end, but this theory fell by the wayside with the unveiling of the 2021 Budget.

One of the measures outlined by Rishi Sunak was an extension of the stamp duty holiday as it now operates until the end of June, meaning that until then no stamp duty will be charged on the first £500,000 of the purchase price of a property.

After this, the point at which stamp duty has to start being paid will drop to £250,000 until the end of September, and not until October 2021, on the current schedule, will it return to the pre-pandemic level of £125,000.

However, in Scotland, Finance Secretary Kate Forbes advised the LBBT holiday will end on 31st March as originally planned.

Different homes for the new normal

As well as fiscal measures it seems that the house price boom is being driven, at least in part, by a shift in the type of property being sought by buyers.

According to the property website Zoopla there was a sharp drop in searches by buyers looking for open plan living, which is doubtless a reflection of the additional demands being placed on living space by the widespread switch to working from home.

At the same time phrases such as ‘rural’ and ‘secluded’ became common search terms, signalling a shift away from city centre living as evidenced by the strength of the market in Scotland’s rural areas, offering tranquil surroundings and larger properties with a home office, study and garden.

This was reflected in the fact that the prices for detached properties rose by 10% over the year up to December, while those for flats and maisonettes went up by just 5%.

What the situation demonstrates is the remarkable resilience of the UK housing sector, a resilience spread across the whole of the country rather than being confined, as has often been the case, to London and the south east.

In fact, the region of England which saw the highest growth in average house prices over 2020 was the north west, at 11.2%, with London hitting only 3.5%, the lowest in the UK.

We are supporting more ground-up or conversion developments currently as a percentage of our deals than ever before, which shows that the market is perhaps a bit too warm in some areas for professional buyers to bridge and refurbish, but time will tell. Perhaps the return to original LBTT rate bands in Scotland will see an increase in opportunities for professional investors north of the border.

In the meantime, if you have need of short-term property finance, development, residential bridging or refurbishment, then please get in touch, especially if you are considering a project in Scotland, the area I know best.