Edinburgh performs a solo act

The mini-boom in property prices may have ended for Londoners, but it is a different story in Scotland's capital. In some areas prices are now so high they are beyond the reach of many people.
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Whatever the cultural trends to emerge from Edinburgh this summer, the city is show-ing it can perform a solo on the property stage. Despite a significant slowing of prices in London, Scotland's capital is still seeing some properties selling for a good 20 per cent more than the asking figure.

Whatever the cultural trends to emerge from Edinburgh this summer, the city is show-ing it can perform a solo on the property stage. Despite a significant slowing of prices in London, Scotland's capital is still seeing some properties selling for a good 20 per cent more than the asking figure.

While a survey this week from the Nationwide Building Society is the latest to show the mini-boom in prices has ended, the London experience is not being shared by buyers and sellers in Edinburgh. The market there is far and away outstripping any other in Scotland, and many purchasers are being forced out of the city.

Romantic Edinburgh, with its worldwide tourist appeal, has always been there, but its increasing importance as a financial centre has brought about an enormous growth in financial services businesses. And the Scottish Parliament, far from having the negative effect some feared, has given a huge boost to the number of companies relocating there.

But its popularity goes far beyond its business status. "It is a lovely, small, well-organised and friendly city, and those of us who have lived here for a time don't always realise how good we have it. A great many others do though," says Matthew Munro of estate agents Knight Frank. "Families from south-east England still find value for money as well as excellent schools. Our idea of a rush hour is hysterical compared with London, and in half an hour you can be out of the city and into the country."

These factors have, inevitably, led to the leap in prices paid for family houses over the last two years, and particularly over the past nine months. Knight Frank has at least 20 people willing to spend between £750,000 and over a million, but with nothing to buy. The Scottish purchasing system of offering bids over the asking price has seen figures in excess of 40 per cent for good quality houses in areas such as New Town and West End.

Perhaps the only sign of a calmer market is that the offers are now more likely to show an increase of between 20 to 25 per cent but, even so, on an asking price of £400,000 that means finding an extra £100,000. At the Royal Institution of Chartered Surveyors in Edinburgh, Elizabeth Bruce says while the market is still extremely active, they were not seeing some of the almost crazy offers made in the earlier part of the year when £400,000 could end up closer to £600,000.

The reconversion of lovely Georgian terraces into houses, either from flats or offices, has inspired more purchasers than there is property. Only three years ago, it was difficult to imagine houses in New Town selling for a million but now that point has been reached, says John Brown, residential sales director of DTZ Debenham Tie Leung. "Two frustrated underbidders for a property in Royal Circus got together to buy then divide a hotel that came up for sale in the crescent shortly afterwards. In the end each will have a house worth £1m for which they paid £700,000 a piece."

These architectural gems have grade A listings, but that doesn't exclude some imaginative reshaping behind the facades. A three-floor town house in Chester Street, overlooking the grounds of St Mary's Cathedral, is about to come onto the market with DTZ for offers over £650,000, with the kind of high-tech, smart wiring to appeal to an international market. The basement and garden were sold to the owner of the ground floor flat next door, who now has a home with a double basement and garden.

But it is not just the top of the market that has seen dramatic leaps in price. According to the Edinburgh Solicitors Property Centre (ESPC), sales of one-bedroom flats have been particularly strong in the previously unfashionable area of Leith. Resting place of the royal yacht Britannia, its redevelopment into a trendy area of shops and restaurants has seen run-down warehouses turned into loft apartments and land reclaimed for new build apartments. In the first quarter of the year, prices showed a year on year increase of 21.5 per cent.

In Crighton Place, between Leith and Edinburgh, ESPC quotes a two-bedroom flat in a late Georgian house for sale at offers over £55,000. The average price for a one-bedroom flat in Leith Walk is £48,000. A two-bedroom flat in New Town, with original fireplace and cornicing, is on the market for a minimum of £139,000.

Simon Fairclough of ESPC says buyers unfamiliar with the Scottish system of purchasing should take good advice on how to pitch an offer. In the city centre he has seen as much as 50 per cent over, although that is rare. But people who have lived and bought in Scotland often end up preferring its system of buying. They find once you become streetsmart, the certainties that the transaction will go through once an offer has been accepted, outweigh the costs involved in any failed bids.

City locations such as Bruntsfield, Murrayfield, Marchmont and Newington, where family houses can cost half a million pounds upwards, are now beyond the reach of many. Trinity, north of the city centre with its stock of Victorian and Edwardian houses, has seen a rise of 40 per cent in three years. New developments tend to be sold at the asking price and at Eyre Place, on the edge of New Town, four bedroom townhouses are on the market with DTZ from £245,000 to £249,000.

Ian Rankin, the author, recently expressed concern in a Sunday newspaper about the pressures on the housing stock, and the effect it has on breaking up long-established communities. His experience of buying and selling six months ago saw a 25 per cent premium on both transactions. He is not alone in predicting that people will have to move into the Edinburgh hinterlands, such as the Lothians.

A strong market inevitably attracts investors and John Brown is often asked about buying to let. "My only advice is that few will pay more than £600 a month on rent, so if it's income they are after, it is not a good idea to spend more than £120,000 on a property." It may not be long before that figure is revised if Edinburgh continues to buck the trend.

DTZ Debenham Tie Leung, 0131 459 2222; ESPC, 0131 624 8888; Knight Frank, 0131 225 8171