Edinburgh and Glasgow house prices to trump UK averages over next five years

House prices in Edinburgh and Glasgow are set to grow by 16.5 per cent and 13.7 per cent respectively over the next five years to 2023, according to new research from the UK’s leading property consultancy, JLL.

Forecasts for the next five years across Scotland suggest more moderate growth of around 11.5 per cent, marginally outperforming the UK five year forecast of 11.4 per cent.
JLL’s forecast for Scotland assumes that a Brexit deal is hammered out over the coming months. The price growth comes at a time when Scotland, like the rest of the UK, has continued to under deliver the number of homes needed to meet demand or to achieve the required targets.
House price growth in Scotland has grown by 17 per cent in the past five years, below the growth of 31 per cent seen across the UK over what has been a period of consistent politician uncertainty.
For Edinburgh, the story of the next five years is one of steady growth, with JLL predicting the city centre to be one of the UK’s top performing markets. A critical shortfall in supply continues to underpin values in the city. The average sales price of a typical two bed flat in the city centre at the end of 2018 was GBP285,000, a 2.5 per cent increase compared with the same period in 2017. JLL expects both price and rental growth in Edinburgh to average 3.1 per cent per annum, well above its UK-wide forecast of 2.2 per cent pa price growth and 2.4 per cent pa rental growth.
For Glasgow, the housing market has been characterised by an undersupply of housing for many years, particularly in the city centre. A shift in interest during 2017 from an almost entirely build for sale bias towards an emphasis on Build to Rent. This shift is evident in Glasgow’s planning pipeline where there are currently around 4,000 Build to Rent units, many of which are set to complete around the same time in 2021 and 2022.
The sale price of a typical new build two bed flat in Glasgow city centre is around GBP226,000, an increase of 1.8 per cent during 2018. Over the next five years JLL expects sales prices to rise by an average of 2.6 per cent pa – below that of many other UK city centres suffering from more acute demand-supply imbalances, but greater than the UK-wise and Scotland forecasts. Rents in Glasgow are also set to grow at 3 per cent pa over the same period.
Nick Whitten, Director of JLL residential research, says: “Brexit has undoubtedly created headwinds for buyers, investors and developers, and looks set to produce further headwinds over the coming years. Through this air of uncertainty, the mainstream housing market continues to perform remarkably normally. Transaction volumes in Scotland are only around 5 per cent down on where they were at Q1 2016, just before the EU vote. Buyers and sellers with any discretion in their decision making – investors, downsizers and higher value purchasers in particular – are typically taking a pause to see how Brexit unfolds before making their next move. We expect that dynamic to continue, and forecast that house prices in Scotland and the UK increase modestly as a result over the next five years.”
Jason Hogg, Director of JLL’s Residential team in Scotland, says: “In recent years Scotland’s major cities have established themselves as stand out performers in the residential market, with Edinburgh and to a lesser extent Glasgow seeing above average house price growth. This has been aided by the significant supply shortfall and growing demand from people wanting to live in city centres. The moderate growth across Scotland’s house prices are somewhat skewed by the above average performance of both Edinburgh and Glasgow, which are both set to see strong growth as limited development activity creates further discord between demand and supply.”

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