An extraordinary year in many ways, 2015 has seen market changing political and economic conditions to put it mildly – more of which later. Hot on the heels of the Scottish Referendum we then faced the massive upheaval of the new Scottish Land & Buildings Transaction Tax (LBTT) followed by a General Election – quite a lot for the market to digest and react to in a mere 12 months. And in many ways, the repercussions of all these events won’t be fully understood until the summer of 2016 as the only way of gauging the real effect of LBTT on tax take will be to compare the early spring markets in 2014 and 2016, because 2015 was an anomaly. We can, however, glean some interesting insights in comparison with sales last year, and a glimpse of the impact of LBTT at the higher end of the market.

LBTT – necessary reform or flawed thinking?

As with most tax legislation, the answer to this question varies radically. For buyers of properties below £325,000, the new rates have proved very favourable, keeping this core market sector happily buoyant as reflected in strong sales, particularly in Edinburgh city centre. For the premium end of the market however, (properties worth £500,000 plus), there is no doubt that LBTT has, if not put the brakes on, changed gear and slowed the market down. There was a predictable yet dramatic rush to transact on higher priced properties before 1 April, resulting in our Edinburgh office achieving an unprecedented 189 transactions in March alone compared to 49 in 2014 (needless to say, we had a rather quieter April...).  So there’s no doubt the implications of LBTT have temporarily delayed the complete recovery of the prime market. The mainstream residential gains, however, have balanced this out, as has as a super-healthy lower end of the market, with buy-to-let still a very viable investment in Edinburgh, which is of course not affected by the 3% stamp duty rise in England and Wales.

What are the implications nine months on for higher-value properties?

The bottom line is a fine property in a good location, priced correctly is still going to sell well, despite the tax situation. It is possible that some mid-market owners who might have considered upscaling are deciding to spend the money they would have to pay in tax on extending and upgrading their current homes, but generally speaking, the quality properties in Edinburgh still look robust and once the ripples of taxation reform settle down, we think this end of the market will continue steadily.

So how do the 2015 figures stack up?

We’ve done some number crunching (with the help of our friends at the ESPC) and the results are revealing, for the Edinburgh property market as a whole and our own performance this year.

In a nutshell, despite the political and economic uncertainty, it’s safe to say the market seems to have weathered the storm apart from a natural lull immediately following the introduction of LBTT: we’ve sold more properties, more quickly, than last year, with average prices rising – an encouraging way to start the new year, especially for those with property to sell. Here’s a snapshot:

  • The average price of a property sold by Simpson & Marwick this year is 61% higher than the ESPC average.
  • The average price for a 2 bedroom flat in Edinburgh city centre sold by Simpson & Marwick was £307,600, up significantly from the 2014 average of £284,000. The average ESPC selling price for a similar 2 bed property was £261,000.
  • The average price for a 3 bed flat sold by Simpson & Marwick in the city centre this year was £410,000, compared with £385,000 for the same period last year. Again, this compares favourably with the ESPC average of £342,650.
  • Including similar sized properties slightly further afield in the whole of the city of Edinburgh, our average 2 bed flat sold for £265,650 – slightly higher than last year’s average of £249,500, but still considerably higher than the ESPC city average which was £184,000 for this year.
  • 3 bed properties averaged out over the whole of Edinburgh hit the £379,000 mark for Simpson & Marwick – a rise on last year’s figure of £359,000 – and again, significantly higher in value than the ESPC average of £268,000.
  • Another positive indicator is the number of properties now achieving their home report valuation.  In 2015 74.7% of 3 bedroom flats sold by Simpson & Marwick achieved their HR value – a significant jump of 31.5% from 2014.  Similarly 77.8% of 3 bed houses achieved their valuation (an increase of 10.2%).  Across the board, Simpson & Marwick properties achieved an extremely positive average of 102.3% of the HR valuation.
  • In our other territory of East Lothian, our average selling price across the board was £338,041 - an increase of 4.5% from 2014 and a massive leap from the ESPC equivalent average selling price of £212,593.
  • As well as price, the speed of a sale is always a trusty indicator of the strength of the market and availability of buyers. We were cheered to note that compared with 2014, this year has seen the average selling time decrease. For example, a Simpson & Marwick property in the city centre took an average of just 28 days to sell (compared with 34 days last year) – 12% faster than the ESPC.
  • As is usual with more rural properties, the selling time tends to be a little longer, and yet we still saw a speeding up of transactions from 50 days last year to 46 days this year. The ESPC reported an average selling time in East Lothian of 53 days, so we are proud to say we sell seven days faster in this popular county!
  • By the end of 2015, the expectation from forecasters is that Scotland will outperform the UK, with 3.5% growth compared to 2% south of the border.

What can we expect in 2016?

With gentle economic growth predicted and (hopefully) no major political issues or surprises rearing their heads, we are looking forward to a period of steady growth and robust sales, with a plethora of buyers out there always on the look out for high quality, well located properties with realistic Home Report valuations.

Edinburgh is still basking in the ‘Best Place to Live in the UK’ accolade from this year, and there’s no doubt that it is “A city of shifting light, of changing skies, of sudden vistas. A city so beautiful it breaks the heart again and again.” Beautifully put by one of our city’s greatest novelists, Alexander McCall Smith.

There is no shortage of people eager to buy in this most special of places, and with Simpson & Marwick’s merger with global law firm Clyde & Co, we can now offer a worldwide network of 380 partners in 14 different countries: exciting times for us, as we aim to bring an even higher degree of market intelligence and level of service to all our clients as we move forward into 2016.  Our residential property division is, of course, continuing to trade under the Simpson & Marwick name.

I would like to wish all of our past, present and future clients, buyers and professional connections a very Happy Christmas and prosperous New Year.

Richard Loudon

Property Partner

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Simpson & Marwick is the trading name of the Residential Property Division of Clyde & Co (Scotland) LLP, a limited liability partnership registered in Scotland under number SO305618 and with its registered office at Albany House, 58 Albany Street, Edinburgh, EH1 3QR, United Kingdom. Clyde & Co (Scotland) LLP is authorised and regulated by the Law Society of Scotland and uses the word "partner" to refer to a member of the LLP, or an employee or consultant with equivalent standing and qualifications. A list of members is available