RESIDENTIAL RESEARCH

EDINBURGH
CITY INDEX
STOCK LEVELS RISE AHEAD OF
TAX RATE CHANGE
Property prices in Edinburgh increased again in the final three months
of the year, the twelfth consecutive quarter that prices held steady or
rose. Oliver Knight examines the latest figures.

Results for Q4 2014

Prices rose by 0.5% between October
and December
The annual change in property values
in 2014 was 4.2%, up from a 3.4% rise
in 2013
At the end of November, the number of
properties for sale was 29% higher than
in September
Edinburgh accounted for 62% of all
1m+ sales in Scotland over the first
nine months of 2014

Over the last year the property market in

Edinburgh has proven to be remarkably
resilient. A 0.5% increase in values
between October and December meant
that prices ended the year up 4.2%.
This has been achieved in spite of the
uncertainty surrounding the outcome of
the independence vote and the reform of
stamp duty during the course of the year.
The number of transactions since the
vote was 81% higher than the two
months before, underlining the offers
and exchanges that were happening in
the market all through the run-up to
the Referendum.
The announcement of the proposed Land
and Buildings Transaction Tax (LBTT) rates
in October is also encouraging both buyers
and sellers to take action, especially
in light of the stamp duty reforms
announced by George Osborne in the
Autumn Statement. Under the LBTT rates
proposed by the Scottish government,
from April 2015 anyone buying a property
valued at more than 254,000 will see their
tax bill increase.

This is evident from the sharp rise in the

number of properties for sale in the city
market in Q4. At the end of November
the number of properties for sale through
Knight Frank was 29% higher than at the
end of September, and 48% higher than
the end of the first quarter in March.
We expect stock levels will continue to
rise prior to the introduction of LBTT as
vendors look to move before the new levy
comes into force.
The number of sellers is set to keep
rising, as the number of valuations carried
out in Edinburgh over the two months
subsequent to the rates being announced,
a good forward indicator of future stock
levels, was 79% higher than the same
period last year.
Any notable increase in the number of
properties for sale is likely to have a
knock-on impact on price growth.
Edward Douglas-Home, Head of
Edinburgh City Sales, said: We expect
that the certainty provided by the result
of the Referendum, as well as the
forthcoming LBTT in four months time will
continued overleaf...

FIGURE 1

FIGURE 2

Price growth

Stock levels rise pre-LBTT

Edinburgh quarterly and annual price change

Number of available properties at eend of

November compared to earlier this year

2.5%

5.0%

2.0%

1.0%

150

130
120
110

2.0%

100
0.5%

1.0%

c14
De

Ju

n14

0.0%

ar
-1
4

0.0%

c13

For the latest news, views and analysis

on the world of prime property, visit
Global Briefing or @kfglobalbrief

4.0%

3.0%

De

Follow Oliver at @oliverknightkf

QUARTERLY
ANNUAL

1.5%

Se
p13

We expect stock levels will

continue to rise prior to the
introduction of LBTT as vendors
look to move before the new
levy comes into force.

160

140

Residential Research

Se
p14

OLIVER KNIGHT

6.0%

Source: Knight Frank Residential Research

90
80
70

Mar Apr May Jun Jul Aug Sep Oct Nov

Source: Knight Frank Residential Research

EDINBURGH CITY INDEX Q4 2014

mean that the winter market will be much

busier than it has been in previous years.

here increasing in value by 4.3% on an

annual basis.

An increase in the number of homes

available for sale is good news for
potential buyers, who have a greater
degree of choice when it comes to
finding a new home. Demand for welllocated properties in the citys established
residential areas, such as in New Town
and the West End and the South Side, has
been strong throughout 2014 and we are
anticipating this will continue.

Focus on 1m+ sales

FIGURE 3

Activity in the 1m+ market

in Scotland
1m+ transactions in Edinburgh and Scotland
2014 (Jan-Sept)

Edinburgh accounted for 62% of all 1m+

sales in Scotland over the first nine months
of 2014, according to data released by the
Registers of Scotland.

50
SCOTLAND
EDINBURGH

40

Number of sales

New Town saw the highest number of high

value properties changing hands over this
time, followed by the West End.
There was a notable spike in transactions
in the third quarter, ahead of the
Referendum, which suggests that any
uncertainty caused by the vote was not
enough to override an underlying recovery
in sales.

Property markets in the south of the

city, including Grange and Morningside,
enjoyed the greatest price growth in 2014
at 4.7%, followed by the New Town and
West End areas of the city, with homes

30

20

10

FIGURE 4 Tax

80,000

CURRENT SDLT CHARGE

LBTT

12,000

Stamp duty payable

Stamp duty payable

14,000

on buying property: Current regime vs new LBTT

10,000
8,000
6,000

254,000

4,000
2,000

60,000
50,000
40,000
30,000
20,000

GLOBAL BRIEFING

10,000

For the latest news, views and analysis

on the world of prime property, visit
KnightFrankblog.com/global-briefing

360,000
400,000
440,000
480,000
520,000
560,000
600,000
640,000
680,000
720,000
760,000
800,000
840,000
880,000
920,000
960,000
1,000,001

340,000
350,000

325,000

300,000

280,000

260,000

240,000

220,000

200,000

180,000

160,000

140,000

Q3 2013

Source: Registers of Scotland

0
120,000

Q2 2013

CURRENT SDLT CHARGE

LBTT

70,000

0
100,000

Q1 2013

Price of property

Price of property

Source: Knight Frank Residential Research

100,000
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
220,000
230,000
240,000
250,001
260,000
270,000
280,000
290,000
300,000
310,000
320,000
330,000
340,000
350,000

RESIDENTIAL RESEARCH
Liam Bailey
Global Head of Research
+44 20 7861 5133
liam.bailey@knightfrank.com

Knight Frank Edinburgh City Index, Q4 2014

Edinburgh
3 month
6 month
1 year
3 years

0.5%
1.8%
4.2%
8.5%

New Town/
West End

North

0.2%
1.5%
4.3%
11.1%

South

0.7%
1.6%
4.3%
5.3%

West

0.7%
2.3%
4.5%
9.5%

Oliver Knight
Residential Research
+44 20 7861 5134
oliver.knight@knightfrank.com

0.4%
1.6%
3.3%
5.0%

PRESS OFFICE
Lizzie Copestake
+44 20 7861 1033
lizzie.copestake@knightfrank.com

Source: Knight Frank Residential Research

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

RESIDENTIAL RESEARCH

RESIDENTIAL RESEARCH

UK RESIDENTIAL
MARKET UPDATE

RESIDENTIAL RESEARCH

COUNTDOWN TO THE ELECTION

12%
The Chancellor fired the starting
gun for the UK General Election campaign
1.4 million
during last weeks Autumn Statement, responding to years of lobbying for
10% of the stamp duty rules for residential property.
a wholesale transformation
10%
Meanwhile house price momentum continues to ease, and the Bank of
925,000
England has calculated the impact that rising interest rates will have on
5% data.
households, and the economy. Grinne Gilmore examines the latest
12%

LONDON
RESIDENTIAL
REVIEW

PRIME
COUNTRY
REVIEW

0%
Up to
125k

The Wealth Report

2014

POLITICS AND
POLICY IN SCOTLAND

Prime Country Review

Winter 2014

IMPACT OF TAX CHANGES

MANSION TAX AND

THE LETTINGS MARKET

125k
-250k

250k925k

925k1.5m

1.5m+

PROPERTY VALUE

It will now be difficult

to suggest that high
value properties are not
taxed enough.
Follow Grinne at @ggilmorekf
For the latest news, views and analysis
on the world of prime property, visit
Global Briefing or @kfglobalbrief

THE RIPPLE STARTS

TO TAKE HOLD

5%

Source: Knight Frank Residential Research

GRINNE GILMORE

Head of UK Residential Research

AREAS OF
OUTPERFORMANCE

The London Review

- Winter 2015

Knight Frank Research Reports are available at KnightFrank.com/Research

2%

5%

= 83,750

The move reflected the changes announced

in Scotland several months ago. However,
whereas Scotland announced rates (which
will come into force from April next year)
where anyone buying a home worth around
254,000 will pay more under the new
system, the Chancellor chose a breakeven point of 937,500 making sure that
the vast majority of purchasers would be
paying less money in stamp duty under the
new system. The timing of the move cannot
be ignored it is likely to provide a fillip to
sentiment as parties gear up for the
General Election.
Buyers in Scotland will pay the new rates
announced by the Chancellor until their
new rates come into force next year.

Up to 125,000

2%
0%

NEW SYSTEM

Purchase price of property

Policymakers in Scotland also reformed the

stamp duty regime for land and commercial
property, whereas the new rates announced
in the Autumn Statement only refer to
residential property in the rest of the UK.
Under the new rules, buyers of higher value
homes now face higher stamp duty charges,
as examined in our Tax Update. It is possible
that this sector of the market may take some
time to absorb the changes, with harder
negotiations between buyers and vendors
likely, especially in these first few weeks
after the introduction of the new rules.
However, the changes could actually serve
to provide more certainty on the outlook for
this part of the market. With a top rate of
12% stamp duty, it will be difficult for Labour
or the Liberal Democrats to imply that these
properties are not highly taxed enough a
key tenet of their arguments for a mansion
tax, something which has been weighing
on sentiment in the prime markets.
Meanwhile, average house prices in
November continued to rise across the
UK, but at a much slower pace than in
recent months. According to Nationwide,
average annual price growth was 8.5%
in November, down from 11.8% in June.
There have been suggestions that the cut
in stamp duty may serve to boost prices,
as sellers factor the decreased purchase
costs into their sale price.

UK Residential Market
Update Dec 2014

Over 1,500,000

= 70,000

Over 925,00 and

up to 1,500,000

250,000
125,000

OLD SYSTEM

Over 250,000 and

up to 925,000

0%

Source: Knight Frank Residential Research

12%

2%

LONG-TERM REWARDS,
SHORT-TERM UNCERTAINTY
WINTER 2015

UK PRIME COUNTRY HOUSE MARKET

WINTER 2014

COUNTRY MARKET
UPDATE

Over 1,500,000

Up to 125,000

10%

6%

10%
4%
925,000

5%

Stamp
duty

The new stamp duty rates

Percentage paid in each price band

A comprehensive reform of
stamp duty in England & Wales
has been introduced

RATE PAID ON PART OF

PRICE WITHIN EACH BAND

125,000

10%
Old vs new stamp duty charges
0% for a
1.4 million property
8%

Over 125,000
and up to 250,000

Rents in prime central London

were flat in November, but up 3.3%
year-on-year

250,000

2%

5%
UK housing and
economic overview
The reform of stamp duty comes after years
%a move away from the slab
of lobbying 2
for
structure, which meant the whole value of
0%
a house was taxed according to what
stamp duty bracket it fell into. The
new system, which came into force on
December 4th, is a progressive tax,
like income tax, which means each part
of the value of the house is taxed at the
appropriate rate (as shown opposite).
Over 925,00 and
up to 1,500,000

Prime central London property

values dipped by 0.2% in November;
the annual rate of growth dropped
to 6.1%

Over 250,000 and

up to 925,000

UK house prices rose by 0.3% in

November, with the annual rate of
growth slowing to 8.5%

Over 125,000
and up to 250,000

Key facts
December 2014

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