Edinburgh’s prime residential prices have jumped by 10.6% in 2018, with properties valued above £2m surging ahead of a new tax regime.
The city’s prime market has not grown by such a steep level in more than a decade, with annual price growth averaging just 1.4% between 2010 and 2018, according to Knight Frank data.
In comparison, the prime market in the whole of Scotland grew by 2.3% year-on-year.
One reason for the strong performance is a rise in sales volumes. The data show that sales above the £1m mark in 2018 ran 12% higher than in 2017.
In the fourth quarter, £2m-plus properties recorded the strongest growth, with values up 3.5% on average in Edinburgh and 1.3% across Scotland. Homes valued between £500,000 and £1m grew by 1% during this time.
However, forthcoming Scottish tax changes could weigh on the market in 2019. The government plans to increase the additional land and buildings transaction tax rate for second home purchasers and buy-to-let investors from 3% to 4% of the total purchase price. Property taxes in Scotland are already higher than across England and Wales.
As has been the case with previous pre-announced tax increases, Knight Frank says there may be a modest spike in activity ahead of the introduction in late January.
Oliver Knight, an associate in Knight Frank’s residential research team, said: “A key factor underpinning recent strong performance over the past year in Edinburgh has been a notable increase in activity levels, particularly within higher price bands. In the main, the data suggest that Edinburgh has been less affected by the political uncertainty impacting other prime markets in the UK.
“No market likes uncertainty, though, and in recent months, as the planned date for the UK’s withdrawal from the European Union nears, activity in prime markets has started to moderate, which could weigh on transaction volumes in early 2019.”
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