Savills report

Scotland gains from rebalancing of housing market

The total value of homes in Scotland is up on pre-pandemic levels (pic: Terry Murden)

Scotland has benefited from a geographical rebalancing of the housing market and remains a popular place to invest in property, according to new data.

A fall in values across London and the South which are most exposed to higher interest rates was offset by a £29 billion increase across the rest of the UK.

The total value of London’s housing stock decreased by £39.3bn (-2.1%), while the South East, South West and East of England saw a combined £16.5bn (-0.5%) fall.

By contrast, markets further from London which have a greater capacity for growth, saw values increase on the year. The most significant uplift was in Northern Ireland (3.2%), North East (1.4%), Scotland (1.3%) and the East Midlands (1.3%).

While London accounts for the largest proportion of the total value of UK housing, since 2016 it has only accounted for 12.01% of total growth. As a result, its proportion of the total value of UK housing has fallen from a high of 24% (in 2016) to a more normal 21% in 2023.  

The total value of all homes across the UK now stands at £8.678trn. This is lower than the 2022 peak, but £1.6trn higher than in 2019, before the pandemic.

Faisal Choudhry, head of residential research for Savills in Scotland, said: “Scotland’s housing sector remains robust and resilient, with the value of housing stock continuing to rise against a backdrop of a marginal dip in the value of UK stock.

Faisal Choudhry
Faisal Choudhry: Scotland’s sector remains robust (pic: Terry Murden)

“Scotland’s growth comes down to comparative affordability, the relative value gap between Scottish locations and those south of the border, with room for further growth a result. Scotland has remained in demand as a place to invest in property from buyers from all over the UK.”

Despite higher mortgage costs, Savills says the market’s resilience means UK housing continues to be a significant, and a relatively secure, store of wealth.

Lucian Cook, head of residential research at Savills, said that even after deducting outstanding mortgage debt of £1.652trn, the figures show that net housing wealth continued to exceed £7trn, a figure 2.6 times the size of the UK’s economy.

“In 2023 the total value was supported by an £80bn uplift from new housing delivery. But, more fundamentally, the market was insulated from interest rate pressures by a combination of more stringent mortgage regulation, the increased use of fixed rate mortgages and the assistance provided by lenders to those in financial difficulty,” he said.

“We may see the cost of mortgages ebb and flow over the course of 2024, as markets respond to changing expectations of when and how much the Bank of England will cut the base rate. But over the medium term we expect affordability pressure to ease, meaning that the recent loss in value should be short lived.”

“A geographical rebalancing of the UK housing market continued in 2023. As expected at this stage in the cycle, the most robust regional markets were those where mortgaged buyers had to borrow less in relation to their income.”

Outright owner occupiers continue to be the major beneficiaries of value growth. According to Savills, homes owned outright now account for almost 40% of the total value of all UK housing.

“Back in 2013 the value of housing held by unmortgaged and mortgaged owner occupiers was very similar. However, demographic changes and a shift in access to home ownership have substantially widened the gap between the two in the last 10 years,” said Mr Cook.

“We continued to see people who benefitted from the homeownership boom of the latter part of the 20th century joining the ranks of the mortgage-free in 2023. But at the same time, aspiring  homeowners had to contend with a combination of high deposit requirements and increased mortgage costs last year.

“Meanwhile increased taxation and regulation have constrained supply in the private rented sector housing, despite rising tenant demand.”

Regional values and changes (£bn)

Total value in 20231 year change (v 2022)Since 2019
South East1,630-6.1297.3
East of England975-6.4170.8
South West845-4.0184.7
North West6803.0149.8
West Midlands6075.2125.7
East Midlands5146.5118.3
Yorkshire & the Humber4893.8102.1
North East1862.533.6
Northern Ireland1474.633.5
United Kingdom8,678-26.71,584.6

Source: Savills Research

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