Scottish Housing Market Review: January - March 2021

Key points for this issue:

Sales

• Housing market activity remained strong in Q1 2021, with transactions increasing by an annual 55.7% ahead of the ending of the temporary reduction of LBTT on 31 March. However, over 2020-21 as a whole, residential property sales decreased by 6.5%. (Source: Registers of Scotland)
• The boost in transactions in Q1 was experienced across Scotland, with the largest increase in Edinburgh, Lothians and the Borders and the smallest in the Clyde Valley. (Source: Registers of Scotland)
• More recent data using residential LBTT returns indicates that housing market activity could be stabilising at pre-pandemic levels, with LBTT returns in May 2021 only 1.3% lower than the 2016-2019 average. (Source: Revenue Scotland)

House Prices

• Annual house price growth was 9.1% in Q1 2021. This is the highest quarterly house price inflation rate since Q1 2008, prior to the financial crisis. (Source: UK HPI)
• Price growth for terraced properties (10.6%) was greater than for flats (7.1%).

Rental Prices

• Private housing rental price growth remain moderate, rising by an annual 1.3% in nominal terms but falling by 0.8% in real terms in May 2021. (Source: ONS)
• Statutory protections for tenants have been extended to 31 March 2022 - these relate to increased notice periods for private and social tenants, making all grounds for eviction of private tenants discretionary, and requiring private landlords to follow Pre-Action Protocols in the case of rent arrears.

Lending

• There has been a reduction in high LTV mortgage lending due to the impact of Covid-19. Data from the FCA for Q1 2021 shows that 1.1% of gross mortgage advances in the UK had an LTV ratio over 90%, down 4.1 percentage points on Q1 2020.
• New mortgages to first-time buyers in Scotland increased by an annual 27.5% in Q1 2021, while new mortgages to home movers increased by 49.2%. Over 2020-21 as a whole, new mortgages to first-time-buyers decreased by 4.8% compared to a fall of 7.4% for home movers (Source: UK Finance)
• The interest rate premium on high LTV mortgages has remained stable since December 2020. In May 2021, the spread between the average advertised 2 year fixed 90% LTV and 75% LTV mortgage rate, at 186 basis points, was just 3 basis point lower than December 2020. (Source: Bank of England)

Housing Supply

• There were 17,029 new build homes completed over the one year period to June 2020, an annual decrease of 21% (4,439 homes) on the previous year, with activity levels being affected by the introduction of COVID-19 lockdown measures from March to late June 2020.
• Private new build sales have recovered since the the lockdown measures implemented in Q2 2020, increasing by an annual 5.0% in February 2021. (Source: UK HPI)
• The supply of affordable housing has recovered since Q2, although supply remains below the Q1 2020 level. 3,160 affordable homes were delivered in Q1 2021, an increase of 1,226 (63.4%) on Q4 2020 but an annual decrease of 9.5%. Affordable Housing Supply Programme starts increased by 2,549 (+112.3%) on the Q4 2020 level, which was an annual increase of 52 (1.1%). (Source: Scottish Government).

Data to: 30 June 2021 - Contact: William.Ellison@gov.scot; Bruce.Teubes@gov.scot