Scottish Housing Market Review Q1 2024

Key points

Sales

• The number of transactions continue to fall in response to higher interest rates: Registers of Scotland data for Q4 2023 show that residential sales across Scotland fell by 12.0% relative to Q4 2022, and by 13.4% relative to Q4 2019, prior to the pandemic. However, more up-to-date Revenue Scotland data shows that over the 3 months to February 2024, Land and Buildings Transaction Tax (LBTT) returns fell by an annual 2.3%, which suggests the rate of decline may be moderating. Moreover, Bank of England data on mortgage approvals across the UK shows that in the 3 months to February 2024 approvals rose by an annual 39%, although they remained 18% below their pre-covid level.

House Prices

• Although higher interest rates have also weighed on the previously elevated level of house-price inflation, which has fallen from its recent peak of 13.3% in Q3 2021 to 1.2% in Q4 2023, the latest quarterly growth rate was higher than that recorded in the previous three quarters. [Source: UK House Price Index (HPI)]
• House price inflation was much higher for new-build properties than for existing build: in Q3 2023, new-build prices increased by an annual 8.1% while existing build prices decreased by 1.2% (note these figures are one quarter behind other HPI data).

Private Rental Sector

• The most recent Scottish Government private rental data, which relates mainly to advertised rents which have not been subject to caps under the Cost of Living Act, shows that the average level of rent paid in the private rent sector in Scotland in the year to September 2023 was £841 (for a 2-bed apartment – the most common size), an annual increase of £105 (14.3%). Out of all Broad Rental Market Areas in Scotland, Greater Glasgow had the largest increase at 22.3%.
• While the rent cap and eviction protection measures under the Cost of Living Act came to an end on 31 March 2024, as from 1 April the rent adjudication process has been modified for a period of one year to protect tenants from steep rent increases which could be experienced from a sudden move to open market rent.

Mortgage Lending

• New mortgage advances to first-time buyers in Scotland decreased by an annual 11.3% across 2023 as a whole, whilst for home movers the decrease was 15.0%. [Source: UK Finance].
• There has been an upward trend in the total number of residential mortgage products which in March 2024 reached 6,004, the highest level since March 2008. [Source: Moneyfacts].
• While, in response to the Bank of England leaving Bank Rate unchanged, there was a decrease in the average advertised 2-year and 5-year fixed mortgage rates in the 6 months to February 2024, average mortgage rates increased over the month to March 2024 to stand at 5.76% and 5.34% for 2-year and 5-year fixed rates, respectively [Source: Moneyfacts].
• The increase in mortgage rates in recent years is reflected in affordability ratios: for home movers, capital and interest payments as a share of borrower income for new loans has increased from a low of 15.7% in Q3 2020 to 18.7% in Q4 2023, while for first-time buyers it has increased from a low of 15.3% in Q2 2020 to 20.5% in Q4 2023 [Source: UK Finance].
• While the number of regulated mortgage accounts entering arrears across the UK increased by an annual 22.7% to 14,824 in Q4 2023, this was a decrease from the previous quarter. There was also an annual decrease of 5.6% in new regulated mortgage possessions in Q4 2023. [Source: FCA].
• Non-regulated mortgages (which include buy-to-let (BTL) mortgages) which were 1.5% or more in arrears represented 1.62% of the total number of mortgages, up from 1.13% a year earlier, and the highest figure since Q4 2016. There was also a 31% annual increase in new non-regulated mortgage possessions in Q4 2023, although possessions remained 12% below the 2019-20 average. [Source: FCA].

Homelessness

• In Scotland, there were 20,114 homelessness applications recorded in April to September 2023, an increase of 3% compared to the corresponding period in the previous year. The number of households assessed as homeless was 16,420, an increase of 4% compared to April to September 2022. The number of households in temporary accommodation on 30 September 2023 was 15,625, an increase of 8% from 30 September 2022. [Source: Scottish Government]

Housing Supply

• There were 20,992 new build completions across all sectors in Scotland in 2023, a decrease of 11.4% (2,700 homes) on 2022. All-sector starts were down by an annual 23.8%. [Source: Scottish Government]
• 9,680 affordable housing completions were recorded in 2023, a decrease of 4.8% (493 homes) compared to 2022. Over the same period approvals have fallen by 4.8% (316 homes) to 6,239, whilst starts have decreased by 20.4% to 6,046. [Source: Scottish Government]

Housebuilding Material Prices

• Price inflation of construction materials used in new house building, which had reached 24.0% in June 2022, has fallen sharply, and was 0.5% in January 2024. [Source: UK Government]

Data to: 31 March 2024

Contact: Jake.Forsyth@gov.scot; Bruce.Teubes@gov.scot