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High-Value Transactions Aiding Property Price Growth in Edinburgh

Home values in the Scottish city rose 3.3% in the past three months

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Edinburgh, Scotland

Westend61/Getty Images
Edinburgh, Scotland
Westend61/Getty Images

Property prices in the prime market in Edinburgh, Scotland, are rising at record-breaking rates, supported by an increase in sales valued above £1 million (US$1.4 million), according to a report Friday by Knight Frank.

Home prices in the prime market increased 3.3% between January and March, the fastest rate of quarterly growth logged by the real estate consultants’ Prime Edinburgh City Index since its inception a decade ago, the report said.

More:Property Prices In Scotland Rising Faster Than the Rest of the U.K.

The annual change in property values in the Scottish city also reached a new high of 7.7%, the highest level of growth of any prime market—defined as the top 10% of the market—Knight Frank tracks.

High demand from buyers outweighing new housing supply is one of the main reasons behind the rise in values across the city, according to the report.

"An analysis of listings data shows there have been 40% fewer properties worth £500,000 (US$704,600) or more put up for sale so far in 2018 compared with the same period in 2017," said Oliver Knight, research associate at Knight Frank in the report.

A 2% increase in transactions last year helped underpin prices in the city, too, according to the report.

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But it was at the top end of Edinburgh’s property market where the most transaction growth was seen. The number of sales with a value above £1 million was 16% higher in 2017 compared with the previous year.

By comparison, across Scotland, there was a slight dip in overall transactions worth £1 million or more, from 166 in 2016 to 159 last year. As a result, Edinburgh now accounts for 65% of transactions in this market, up from 55% the previous year, the report said.

The increases come after a period of more subdued activity in the prime market after the introduction of Land and Building Transaction Tax in 2015. The Scottish property tax replaced the Stamp Duty Land Tax. Buyers can expect to pay a 12% tax on a property worth £750,000 (US$1.05 million) or more.

Looking forward, Knight Frank suggests that while last year’s positive momentum has so far carried on into this year, a relative shortage of new homes coming onto the market could weigh on transaction volumes going forward, though notes this should also support values.