PRE-REFERENDUM DIP FOR SCOTTISH COUNTRY HOUSE PRICES Interest from prospective buyers for Scottish country houses remained robust in Q2 2016, despite uncertainty surrounding the EU Referendum.

Key facts for Q2 2016Prices declined by 0.4% between April and June

On an annual basis prices are 0.6% lower than a year ago

The number of new applicants registering their interest in purchasing a property increased by more than 12% in Q2 2016 compared to last year

The number of viewings was up by more than 30% over the same period

RESIDENTIAL RESEARCH

SCOTTISH COUNTRY HOUSE INDEX

OLIVER KNIGHT Associate

“ Prime prices dipped slightly between April and June as uncertainty surrounding the outcome of the EU Referendum filtered through to the market.”

Follow Oliver at @oliverknightkf

For the latest news, views and analysis on the world of prime property, visit Global Briefing or @kfglobalbrief

Scottish country house prices declined by 0.4% between April and June, only the second time prices have fallen on a quarterly basis since 2013. Prices are 0.6% lower than a year ago.

This index reflects pricing before the result of the EU Referendum was announced.

The reasons for the slight dip in prime values are twofold. Firstly, the second quarter of 2016 saw a degree of uncertainty surrounding the outcome of the EU Referendum which dampened sales activity as buyers waited for clarity on the result.

The vote was the fourth major political event within the last two years in Scotland, following the Independence Referendum in 2014, the UK General Election in 2015 and the Scottish Parliamentary Elections in 2016 (figure 1).

The second factor is that buyers remain price sensitive as a result of higher purchase costs following the introduction of the Land and Buildings Transaction Tax in April 2015.

Ran Morgan, Head of Scotland Residential, said: “The EU referendum result has

introduced a general air of caution and it is evident in every discussion you have. The market however continues to perform with viewings and deals being done, especially in key cities. The top end of the market has been more challenging during the last 12 months, but nevertheless, two deals were done over £1.5m in the city the week after Brexit.

“In the rural market we have had requests from buyers based in England that are now looking to Scotland as a place to live as a result of Brexit. If the property is of the right quality and is accurately priced then there is competition for it. However, property that is deemed expensive or that hasn’t attracted more than one bidder is vulnerable to buyers using Brexit as an excuse to negotiate the price down.”

The number of new applicants registering their interest in purchasing a property with Knight Frank increased by more than 12% over the three months to June compared to the same period last year, while the number of property viewings was up by more than 30% over the same period.

There is likely to be continued uncertainty in the short-term as the country waits for

Source: Knight Frank ResearchSource: Knight Frank Research

ANNUALQUARTERLY

Mar

-15

Jun-

15

Jun-

16

Sep

-15

Dec

-15

Mar

-16

Dec

-14

Sep

-14

Jun-

14M

ar-1

4D

ec-1

3S

ep-1

3Ju

n-13

Mar

-13

Dec

-12

Sep

-12

Jun-

12M

ar-1

2D

ec-1

1S

ep-1

1Ju

n-11

Mar

-11

Dec

-10

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

FIGURE 2

Prime Scotland prices Annual and quarterly price change

FIGURE 1

Scotland: Prime stock snapshot Properties listed for sale in Scotland above £500,000

400

450

500

550

600

650

700

750

800

850

900

May

-16

Mar

-16

Jan-

16

Nov

-15

Sep

-15

Jul-

15

May

-15

Mar

-15

Jan-

15

Nov

-14

Sep

-14

Jul-

14

May

-14

Mar

-14

Jan-

14

May 2016:Scottish Elections

Apr 2016:3% LBTTsurcharge

May 2015:UK General

Election

Sep 2014:Scottish independence

Referendum

Apr 2015:LBTT introduced

Jun 2016:EU referendum

PRIME SCOTTISH PROPERTY INDEX Q2 2016

“ Interest from prospective buyers in prime Scottish property has remained fairly robust.”

the end of Q1 2016 down from 141 in 2015,

according to data provided by the Registers

of Scotland.

Unsurprisingly, the majority of million

pound sales took place in Edinburgh,

which accounted for 52% of such

transactions over the previous 12 months.

This was followed by Glasgow, which

accounted for 17% of sales.

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UK Residential Market Update - June 2016

Economic and housing market overview The imminent EU Referendum is dominating the national debate. There are signs that the uncertainty over the outcome is having an impact on the economy, the financial markets and the currency markets, as well as some sectors of the housing market.

As we await the result however, here is the latest from the residential sector.

New data from HMRC shows a slight uptick in transactions in May, after the sharp fall in activity in April. As the chart below shows, this distortion in the market was due to the new stamp duty charge for additional dwellings introduced on April 1st, and it is not the first time that the market has reacted to stamp duty policy changes. However, it is worth noting, that despite the sharp fall, transaction levels are still higher than back in 2010, 2011, 2012 and much of 2013.

It has also been an interesting month for house price statistics, as after several years of work, a new UK-wide house price index has been released. This will replace both the ONS’s previous index and the Land Registry index plus Registers of Scotland. As can be seen from the charts opposite, the new index places the average UK house price at £209,000, slightly higher than the Land Registry index, but noticeably lower than ONS’s previous index. This is also

RESIDENTIAL RESEARCH

UK RESIDENTIAL MARKET UPDATE

“ There was an uptick in transactions in May after the sharp fall in activity in April. However, it is worth noting that despite the slowdown from April 1st, transaction levels are still much higher than in the five years following the 2008 financial crisis.”Follow Gráinne at @ggilmorekf

For the latest news, views and analysis on the world of prime property, visit Global Briefing or @kfglobalbrief

GRÁINNE GILMORE Head of UK Residential Research

MARKET ROUNDUPAverage UK house price growth eased slightly in May, while average prices across Greater London continue to register double-digit growth. In prime central London, prices are broadly unchanged on average, but some areas are still seeing price growth of more than 6%.

Key facts June 2016UK house prices rose 0.2% in May taking the annual change to 4.7%, down from 4.9% in April

Prime central London prices dipped 0.1% in May, and the average annual change is 0.1% in a highly localised market

Average UK rents rose by 2.6% in the year to April, with a 2.8% rise in England. Prime central London rents slipped by 2.3% on the year

Policy impacts on property transactions UK residential property transactions & UK house prices

Source: Knight Frank Research, HMRC, Nationwide

290300310320330340350360370380390400410

UK HOUSE PRICE INDEX (RHS)RESIDENTIAL PROPERTY TRANSACTIONS (LHS)

50,00060,00070,00080,00090,000

100,000110,000120,000130,000140,000150,000160,000170,000

Jan 2010Stamp duty exemption for

purchases under £175,000ends (pre-announced)

24 March 2012Stamp duty holiday for first-timebuyers ends (pre-announced)

April 1 2016Introduction of extra 3% stamp duty for

additional properties (pre-announced)

May 2015General Election

Pri

ce In

dex

Mon

thly

Tra

nsac

tions

201620152014201320122011201020092008200720062005

How the indices compare By price (England & Wales)

£100,000

£150,000

£200,000

£250,000

£300,000

£350,000

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

New UK HPIPrevious ONS HPIPrevious Land Registry

How the indices compare By annual price growth (England & Wales)

Source: Knight Frank Research

-20%

-15%

-10%

-5%

0%

5%

10%

15%

New UK HPIPrevious ONS HPIPrevious Land Registry

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

close to the Nationwide’s average price of £204,000. In terms of annual growth, the indices all show broadly the same trend.

KnightFrank.co.uk/rural

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Issues and insights Threats and opportunities for landowners

Rural property markets Our latest research and analysis

Working for you Adding value for our clients

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KnightFrank.co.uk/rural

The Rural Report - Spring 2016

Important Notice © Knight Frank LLP 2016 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.

RESIDENTIAL RESEARCH

Liam Bailey Global Head of Research +44 20 7861 5133 liam.bailey@knightfrank.com

Oliver KnightAssociate+44 20 7861 5134 oliver.knight@knightfrank.com

SCOTLAND SALES

Ran Morgan +44 13 1222 9600 ran.morgan@knightfrank.com

PRESS OFFICE

Jamie Obertelli+44 20 7861 1104 jamie.obertelli@knightfrank.com

2016

10th Edition

THE WEALTH REPORTThe global perspective on prime property and investment

The Wealth Report 2016

Knight Frank Prime Scottish Property Index Q2 2016

Cottage Farmhouse Small country house

Large country house

Average

3 month 0.0% -0.5% -0.4% -0.5% -0.4%

6 month 0.0% -0.4% -0.2% -0.5% -0.4%

1 year 0.0% 0.4% -0.4% -1.8% -0.6%

Source: Knight Frank Research

a firmer plan on how the UK, and Scotland, will proceed, both politically and economically, now that the country has voted to leave the EU.

£1 million-plus marketThe market at £1 million and above in Scotland is also adjusting to higher rates of taxation, with 104 sales over the year to