Scottish Housing Market Review Q2 2024

Key points

The Scottish Housing Market Review collates a range of previously published statistics on the latest trends in the Scottish housing market.

Sales

• Registers of Scotland data show that in Q1 2024 residential sales registered across Scotland continued to fall in response to higher interest rates, decreasing by 1.8% relative to Q1 2023, and by 4.6% relative to Q1 2019 (pre-pandemic).
• However, more recent Revenue Scotland data shows that over the 5 months to May 2024, Land and Buildings Transaction Tax (LBTT) returns were up by 4.2% compared to the corresponding months in 2023, although they remained 5.6% below the corresponding months in 2019. This suggests that housing market activity may be starting to stabilise, although more data is required.

House Prices

• Although higher interest rates have also dampened the previously elevated levels of house-price inflation, which had reached a recent peak of 12.9% in Q3 2021, it has now accelerated from -0.9% in Q3 2023 to 4.1% in Q1 2024, the highest quarterly growth rate since Q4 2022. [Source: UK House Price Index (HPI)]
• House-price inflation was much higher for new-build properties than for existing build: in Q4 2023, new-build prices increased by an annual 7.2% while existing build prices decreased by 1.0% (note these figures are one quarter behind other HPI data).

Private Rental Sector

• PRS rental prices for new lets (which are not subject to the current temporary modification to rent adjudication) continued to rise significantly, although at a lower rate than in Q4 2023. Citylets data shows a 11.5% increase in Q1 2024, compared to an increase of 12.9% in Q4 2023, while Rightmove recorded an increase of 9.8% compared to 10.6%.

Mortgage Lending

• New mortgage advances to first-time buyers in Scotland increased annually by 9.6% in Q1 2024, whilst for home movers there was an increase of 2.2%. [Source: UK Finance].
• In the 4 months to April 2024, mortgage approvals across the UK rose by 31% relative to the corresponding months in 2023, which again may be sign that the decline in transactions is reaching a turning point. [Source: Bank of England]
• The mean loan-to-value (LTV) ratio on mortgages advanced to first-time buyers in Scotland edged up from 80.1% in Q4 2023 to 80.9% in Q1 2024, as did the ratio for home movers, which rose from 67.1% to 68.3%. The ratio for first-time buyers is now close to its pre-pandemic level in Q1 2020 (only 0.6% points lower), but the ratio for home movers remains significantly below its pre-pandemic level (3.5% points lower). [Source: UK Finance]
• There has been a general upward trend in the total number of residential mortgage products since October 2022, and the 6,658 products available on 1 July 2024 was the highest since February 2008. The total number of BTL products on 1 July 2024 was 2,964, close to the recent peak in December 2023, but still below the series peak of 3,540 in February 2022 [Source: Moneyfacts].
• Despite the Bank of England leaving Bank Rate unchanged and consumer inflation hitting the 2% target in May 2024, the average advertised 2- and 5-year mortgage rates edged up for the fifth consecutive month: since 1 February, the 2-year rate has increased by a cumulative 0.39% points to 5.95% on 1 July 2024, while the 5-year rate increased by 0.35% points to 5.53%. [Source: Moneyfacts].
• While affordability ratios have deteriorated since interest rates began rising at the end of 2021, capital and interest payments as a share of borrower income for new loans in Scotland fell slightly in Q1 2024: by 1.0% points to 19.5% for first-time buyers, and 0.5% points to 18.2% for home movers. [Source: UK Finance].
• Despite a quarterly fall, the number of regulated mortgage accounts in the UK entering arrears in Q1 2024 was still 22.7% higher on an annual basis. The 59,140 in 2023/24 was the highest for a fiscal year since 2014/15 (66,157). However, there were only 856 new regulated mortgage possessions in the UK in Q1 2024: while this was an annual increase of 7.7%, it remained 31% below the pre-pandemic quarterly average for 2019-20. [Source: FCA].
• Non-regulated mortgages (which include buy-to-let (BTL) mortgages) which were in arrears of at least 1.5% of the outstanding balance comprised 1.87% of the total number of mortgages, up from 1.01% a year earlier, and the highest figure since Q3 2014. There was also a 32% annual increase in new non-regulated mortgage possessions in Q1 2024, although possessions remained below the 2019-20 quarterly average. [Source: FCA].

Housing Supply

• There were 19,632 new build completions across all sectors in Scotland in the year ending Q1 2024, 17% (4,150 homes) lower than last year. All-sector starts were down by an annual 15%. [Source: Scottish Government]
• The 9,514 affordable housing completions over the year to end Q1 2024 represented a decline of 9% (952 homes) compared to the year prior. Over the same period starts have decreased by 3% to 6,755 homes, but approvals have risen by 9% (585 homes) to 6,981. [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 to -0.2% in April 2024, while average total weekly earnings growth in the construction sector has fallen from 14.3% in three months to June 2021 to 2.1% in the three months to April 2024. These trends are reflected in the growth rate of the output price index for new housing, down from 12.2% in June 2022 to 2.0% in March 2024. [Sources: UK Government & ONS]

Data to: 8 July 2024

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