Premium homes find a ready market at prices of up to £5m

IN CONTRAST to reports that overall residential demand and prices are slowing, the prime property market is currently as strong as we have ever had.

The market is strongest at the very top end, in excess of 2 million, where there is severely limited supply and an increasing number of wealthy home-based Scots competing for the premier properties.

Edinburgh, as always, is the hub of activity in Scotland. Prices at the top end have moved from 2m two years ago to nearly 5m this year.

There are now numerous homes selling at 1m, which used to be a rarity. Premiums of 30 per cent above the asking price are commonly achieved.

The market in Glasgow and in rural Scotland is also strong, albeit prices are not as high as in Edinburgh and it can take longer to find buyers.

Meanwhile, the restrictive planning system which applies to the whole of Britain means there is a shortage of family homes within daily reach of the main business centres.

Developers are encouraged to build on brownfield sites which are very expensive both to buy and to build on. As a result, the vast majority of developments in Scotland are for flats rather than family homes. Couples looking for homes in which to bring up children either have to spend extraordinary amounts of money to buy in the city, or compromise and move out of town.

This has led to an increase in prices in areas outwith Edinburgh - particularly the East Lothian coastal villages and also towns with good rail links such as Stirling.

The vast majority of buyers on Savills' books state a preference for old houses. Georgian architecture is particularly sought after.

There is such a strong demand for period houses that buildings, which have been converted into commercial use are now frequently being converted back into family homes. There is also an incredible demand for ruins and houses requiring full refurbishment which can be rebuilt in period style to create wonderful family homes.

The demand at the top end of the Scottish residential market will be directly driven by the economy - even if it is not directly driven by interest rates. If Scotland's economy remains strong, we see no reason at all why there should be a drop in demand for good houses.

First-time buyers might be affected by increasing interest rates and the high cost of borrowing but buyers at the top end of the market are not. If we assume the economy is going to remain strong, there is no reason for the top end of the housing market to slow down.

Jamie Macnab is a director of Savills Scotland