The Shepherd Scotland Roundup

The Shepherd Scotland Roundup

Edinburgh Residential Market 2021

By Edward Cook

Scotland’s residential market has seen its share of challenges over the last 15 years, from the financial crash of 2007 to a global pandemic. Historically, property markets tend to suffer in the face of uncertainty, as transaction volumes fall. Edinburgh, however, has usually performed better than most. So how has the Edinburgh market fared in the midst of the Coronavirus pandemic?

In Edinburgh, the Lothians, Fife and the Borders, the average property selling price rose in Q1 2021 by 7.5% year on year to £259,013 (ESPC). What these figures hide however, is the imposition of national lockdowns in both the Spring of 2020, and the Winter of 2020/2021.

The first lockdown saw the property market effectively shutdown, as sellers and buyers, along with surveyors, estate agents and solicitors, were all forced to stay at home. This led to a build up of properties that would otherwise have been coming onto the market, creating a backlog of stock that hit the market after the lockdown was eased, leading to historic volumes of transactions and homes listed for sale in the following months.

Coupled with this rush of supply to the market was an equal rise in demand, as buyers had been forced to wait, as well as have time to reflect on their own circumstances. What had also changed was the demand for specific types of property.

Lockdown had confined people to their own homes and so private outside space, and a place in which to work within the home, became important factors to buyers post lockdown. Those properties with private gardens, main doors, and a study/flexible workspace, continue to attract much interest, and this has led to competitive prices being achieved.

A buoyant market post lockdown led to a second wave of properties coming to market as cautious sellers waited to see how the market would react after a national lockdown. This further fuelled the supply of stock to the housing market, and, in the case of flats with no private outside space, led to an oversupply of this type of property, leading to prices stabilising and, in some cases, properties selling for under their home report valuation.

In 2021, the number of homes coming to market decreased steadily from a high in November 2020, as a second national lockdown came into force. This lack of supply has maintained the buoyant, but price sensitive, market seen in 2020.

While the volume of properties coming to market fell in Q1 2021, the number of transactions in Edinburgh rose sharply, by 72.6% in Q1 2021 compared to Q1 2020. This can in part be attributed to the end of the LBTT relief announced by the Scottish government in March 2020 in response to the pandemic.

Looking ahead, with the reopening of the First Home Fund by the Scottish government and the launch of the 95% mortgage guarantee scheme, it is thought that this area of the market will maintain the strong demand it has seen in the first quarter of 2021.

Since the market re-opened at the end of June 2020, pent-up demand has seen premiums being paid for most categories of residential property in Edinburgh. There is still a lack of supply meaning closing dates remain highly competitive. We would anticipate that supply will increase over the next few months, creating a more balanced market.

With the continued rollout of the vaccine programme, gradual relaxation of lockdown restrictions, the return of children to school, low interest rates, and an improving economic landscape, Edinburgh’s residential market has grounds for optimism for the rest of 2021 and beyond.

Edward Cook is Associate Partner in Shepherd’s Edinburgh office