June 2010 - Monthly Scottish Property Market Update

Apologies for the slightly late posting of this month’s property market update.  The only excuse I have is that, as business goes from strength to strength, our head valuer has been off on holiday this past week and a half and I am filling in for him in his absence and, quite honestly, I’ve got some idea of just how much he gets through in a day now: kudos indeed!

Anyway, this month’s Property Market Update is overwhelmingly positive.  We all like good news so here goes…

Prices Up

Across the UK, recently-released statistics from the two key house price indices indicate that prices are going up.  Admittedly, the rise across the UK in the past month was only 0.1% but every little helps (I’d like to claim that I invented that catchphrase).

More locally, there are clear indications that property prices are rising.  There are a couple of clear indicators:

1. We’re seeing far more properties that are marketed at ‘Offers Around’ achieving more than the asking price;
2. We’re seeing more properties achieving higher than the Home Report valuation;
3. We’re seeing properties that had been ’sticking’ on the market finally selling, even though they hadn’t dropped their asking prices significantly.

Why is this?  In turn:

1. Desirable properties in good areas are attracting multiple interested parties who are bidding against each other at ‘Closing Dates’ – this level of competition usually leads to higher prices being achieved;
2. Property values are rising in Edinburgh and the Lothians and in the Borders too: the property is selling a few weeks after the Home Report is carried-out so, naturally, it is worth a bit more than when the Home Report was done.  That and, of course, the factor mentioned in point 1, just above;
3. As prices go up and confidence returns to the market, and as more attractive mortgage products are available to first time buyers, people who have been sitting on the market for a while just holding out for the price they had hoped for a few months ago are now seeing the market catch up with their expectations, which is lucky for them!

Will It Last?

That’s the Million Dollar Question.  Sadly I don’t have a Million Dollar Crystal Ball (and if I had a million dollars, I’d probably spend it on something far more interesting than a crystal ball, like a Bugatti Veron or by pre-paying my annual parking ticket spend).

So what does logic and reason say?  Well, the government has just outlined austerity measures allegedly more punitive than those imposed by Margaret Thatcher in the 1980s and perhaps almost as tough as anything seen since the Depression MUCH earlier this century.  The banking sector has been further shaken by news of liquidity issues in the Spanish banking sector (which bought up huge chunks of the UK banking market after our own banking system suffered major liquidity issues).  The jobless total is due to rise.  There don’t appear to be a huge amount of new mortgage products aimed at first time buyers.  And that darned volcano in Iceland still won’t stop spewing more filth into the atmosphere than an angry Wayne Rooney does.  That last point perhaps has nothing to do with house prices, admittedly.  But it IS topical.

So when you take all of that into account, you wouldn’t really think that the outlook was terribly positive, would you?

But then all of that is based on logic.  And most people don’t buy properties based on logic.  They buy them based on emotion.  I’ll credit my accountant for stating that what we are seeing in the property market at the moment, certainly in Edinburgh and the Lothians and in the Borders too, is perhaps testament to the fact that people just don’t want to allow house prices to fall.  It almost seems that a collective consciousness has ordained that property prices in this area will not fall beyond a certain point.  And so we continue to see property prices rise in the face of all sorts of data that should indicate a lack of confidence and a lack of willingness to spend money.  The rises are not astronomical, which is great for everyone (’no more boom and bust’, anyone?).  But they certainly don’t seem to be falling any more, in any sector.

Are There Exceptions to This Rule?

Yes.  Buyers can still afford to be picky: there remains an over-supply of certain types of properties, particularly flats.  Therefore shabby properties are still struggling.  They will sell, at the right price but many sellers are not willing or able to drop the price by that much.  It is most certainly worth the time and effort to bring a property up to scratch before selling it: it might be the difference not only of several thousands of pounds but even the chance of selling it at all. This applies more than anything to ex-rental properties.

Conclusion

Prices remain strong.  The family home sector is buoyant.  The prime property market is even more buoyant.  Flats are starting to sell which weren’t selling at that price just a few months ago.  Ex-rental flats and flats that look a bit down at heel will struggle as buyers still rule the roost.  Therefore a bit of paint, some clean carpets and some nice cushions go a long way, particularly with properties in the one and two bed flat sector where there are far more properties than buyers for them.

Meantime, enjoy the rest of the World Cup and Wimbledon and I’ll give you another update in a month (and hopefully in the correct month this time!).

May 2010 - Monthly Scottish Property Market Update

My last monthly property market update went out just before the General Election.  Since then the political landscape in the UK has changed dramatically. 

The big question for this monthly Scottish property market update is: what is happening in the property market today and how will the result of the General Election affect the property market in Scotland?  

I’ve also put some tips in here about how to help your property stand out and to sell in what continues to be a very challenging market in most areas.  I hope you will find it useful and engage in the debate!

HIPs Have Been Scrapped (But It Doesn’t Affect Us in Scotland!)

Home Information Packs have been scrapped by the UK government.  However this legislation only affects England and Wales, not Scotland.  In Scotland we introduced Home Reports on 1 December 2008 and they remain in place for the time being.  It is up to the Scottish Parliament as to whether or not they will be scrapped and it has nothing to do with the Westminster government.

Will they be scrapped in Scotland?  I’ve already written on my Blog about this so I won’t go into any detail in this market update (see http://robert-carroll.co.uk/hips-are-to-be-scrapped-in-england-and-wales-are-home-reports-in-scotland-therefore-doomed/).

If you can’t be bothered reading the whys and wherefores of my thoughts then of course I am gravely and personally offended.  However, I’ll give you a little clue: I don’t think that Home Reports will be scrapped.  Furthermore, I dont’ believe that they should be scrapped on account of them having been one of the principal things that restored some confidence to the property market in Scotland.  There you go, I’ve said it!  There is a faction of lawyers at the moment which is against Home Reports, who have their large tubs out for everyone to see and who are doing their damnedest to make everyone hear them being loudly thumped.  I (perhaps not entirely humbly) disagree with them.  They probably won’t like that.  I don’t care.  I think that Home Reports are good for consumers, we exist to serve consumers, therefore they are a good thing.  The end.

The Edinburgh and Lothians Property Market

I have to confess that, although I call this a ‘Scottish’ property market update, most of my ‘on the ground’ experience of the property market is in Edinburgh and the Lothians as that’s where MOV8 markets and sells most of its properties.  I can of course regurgitate everything that I’ve read and heard about the wider Scottish marketplace but it’s not based on a breadth of actual experience of what is really happening and, as always, it comes to me through a filter of vested interests and agendas so I can never rely 100% on it unless I have seen it myself.  What you get from my updates is, hopefully, as agenda-free an account of what is actually happening rather than what some PR agency says that one of the larger firms of solicitors or estate agents supposedly said about what is happening in the marketplace.  With that disclaimer out of the way…

The general news is that mortgage lending is down and yet prices are up.  Or down.  Or up again.  It depends on which newspaper you read on which particular day.  Here’s my genuine experience of what’s happening…

• In Edinburgh and the Lothians, family homes (particularly more traditional-build ones with gardens) are like hens’ teeth and are selling in a matter of days with high demand and high competition;
• In Edinburgh and the Lothians, demand is also hugely area dependent: areas like Bruntsfield, Morningside, Stockbridge and the New Town are in demand, regardless of the type of property, just because they’re desirable areas to live in and properties are selling very quickly there too;
• First time buyer demand is still very low.  This isn’t surprising as most statistics seem to be showing that lending to this sector is still massively down: in spite of some initiatives by some lenders to offer mortgages with less strict criteria, most first time buyers are still struggling to come up with deposits.  As a result, outside of the traditionally high demand areas (examples above), demand remains very low and one bedroom flats in particular are struggling to sell.  To sell a flat in this sector of the market, it has to be stunningly-presented: there are still first time buyers out there but they can afford to be very choosy!);
• I can only rely on media and word-of-mouth accounts for the rest of Scotland but it appears that Edinburgh and Aberdeen, traditionally strong property markets that have withstood previous slumps better than others, are faring better than Glasgow and Dundee, for example.  More rural areas in, for example, Perthshire seem to be faring well too but again it totally depends on the sub-market within the local market: an attractive holiday home with land is going to be more in demand than a modern, two bedroom flat in a slightly more outlying area.

So What Should You Do To Make Your Property Stand Out From the Crowd?

Even if you have a property in an area of massive demand (Edinburgh’s New Town or Glasgow’s Kelvinside, for example) then ensuring that it is as well presented as possible will either increase the value or, in areas where demand is lower, will probably make the difference between whether it sells or not.  How should you do that?

You can’t change its location so instead focus on the property itself: the following words should all spring to mind when a buyer is walking around your property: clean, crisp, fresh, bright, inviting, stylish, elegant, tidy.  The following should not: needs work (unless it’s being sold as a development opportunity), smells funny, smells fousty, it’s a bit dark, it probably looks bigger with all this stuff taken out of it.

Don’t cramp viewers but do be helpful.  Be polite to viewers and don’t get into an argument with them, even if they are a bit demanding or pushy.  Get kids and animals out of the way, as much as practically possible, if you want to appeal to everyone: viewers are buying a property to suit THEIR lifestyle, not yours.  Tidy up, make the beds and don’t use the bathroom or shower just before viewers arrive (amazing how many people do!).

And finally, when setting your price expectations, don’t read everything that’s printed in the Press: house prices have stabilised but there is a disproportionate number of larger properties selling and that is giving the appearance that property prices are rising faster than they are.

What Effect Will the General Election Result Have on the Property Market in Scotland?

Sorry to disappoint you if you were expecting anything other than a slight fudge at this point…!

I think it’s probably far too early to tell.  There are going to be swingeing cuts to the public sector and that will probably have a disproportionately negative effect on Scotland as such a huge proportion of our population is employed in that sector.  I haven’t heard anything proposed by either of the two parties in the coalition that seems to apply directly to property in such a way that it would have an obvious effect on the market (such as scrapping Stamp Duty or raising it massively).

At the moment the largest elephant in the corner of the room most probably isn’t actually in the UK’s control: the economic position in Europe.  It appears that the Spanish banks are in a bit of a pickle.  It appears that the Greeks are in a massive pickle.  It also appears that this could bring down the Euro because the Greeks aren’t playing ball with the powers that be in the EU.  And very shortly it will probably appear that the Spanish bank pickle has taken steroids and overtaken the Greek pickle in our new pickle race because the Spanish economy was probably even more dependent on property than the UK’s was (and if you thought the price drops in the UK were bad, you should see what has been happening in Spain for the last couple of years!).

With all of that uncertainty around the EU, it’s difficult to focus solely on whether plans to raise the tax-free income tax threshold to £10,000 is really going to make much difference.  What we do know is that people and markets don’t like uncertainty and I fear that in the coming months we’ll see job losses, rises in the cost of living, rises in interest rates (there have already been loud calls for this) which move us from a slightly artificial position at the moment where those who are in work and have a variable rate mortgage are actually better-off than they were a year ago.  Time will tell but I’ll certainly keep you updated if I can.

We'd love to know what your opinion on all of this is.  We've started a Facebook Discussion Topic on our MOV8 Facebook Page so please do click on the following link and let us know what you think: http://www.facebook.com/board.php?status=256&uid=186481235406#!/topic.php?uid=186481235406&topic=14921

Best wishes,

Robert Carroll

Managing Director, MOV8 Real Estate

Property Market Update - April 2010 - General Election Special!

It's been understated, dignified throughout and in no way resembled children chucking mud at each other in a playground: yes, I'm talking about the General Election.  Mercifully we are almost at the end of the campaign and in less than a week it will be all over.  At that point we can finally resume focus on some of the things that have been getting less column inches than they deserve in the past few weeks, most notably Inter Milan reaching the Champions League final, my band's gig at the Bongo Club last Friday and, of course, property market news.

However, never being one to shy away from jumping on a zeitgeisty bandwagon (or to invent a new word like 'zeitgeisty'), I thought that I'd style the April 2010 Property Market Update as an 'Election Special'.  You can rest assured, however, that there won't be another Election Special for another five years.  So, on with the show...

What Effect Has the Upcoming Election Had on Property Prices?

There has been much doom mongering prior to the election with many commentators (my mum and my girlfriend's dad being among the less well known but probably most vocal supporters of this thesis) saying that the election would cause uncertainty in the property marketplace and prevent buyers from buying.  I have to say that I have not heard a single utterance about the election from any potential buyer with whom we've spoken in the past few weeks and months.  If people are waiting to see what happens to the property market after the General Election then they certainly are keeping a very low profile and not enquiring about property AT ALL for us not to get any sense that this is the case.

Whatever happens, and all of the political parties have been avoiding addressing this rather massive elephant in the corner of the room during the election campaign, all of them are going to have to make some pretty painful cuts in certain areas to address a massive national budget deficit.  I would imagine that the average property buyer has been fairly aware of this for several months now so, when it happens after the election, it's not going to be a huge surprise.

Whilst we might not have seen a dip in activity in the past few months, it is entirely possible that the election or re-election of any of the parties might have a positive effect on the property market and that activity levels might go up.  That will of course depend on what they do when they come to, or remain in, office.  And, since I'm a hugely hardened cynic, I suspect that what they actually do when in office might vary slightly from all of the words uttered in the lead-up to the general election, most of which phrases seem to start with 'we believe in' or 'we would like to see' and very few of which seem to start with 'we will actually do...'.

Nationwide Reports 10% Rise in Property Prices, Year on Year - Is This Sustainable and Where Will House Prices Head in the Coming Months?

It was reported very recently, by The Nationwide, that property prices have risen, across the UK, by 10%, year-on-year in April 2010.  It should be noted that these are year-on-year figures which only compare one month against the corresponding month in the previous year so they're not exactly long term forecasts.  However, they do point to a healthier market than has been seen in the past couple of years.

Commentators pointed out that the rate of house price growth is, however, slowing.  These are probably more useful statistics to look at as they point to what might happen in the future.

For what it is worth, I don't see property prices crashing back down.  I could be wrong and please feel free to email me in a year's time and point this out to me if I am!  I think we'll have a confusing couple of years where property owners are seeing statistics telling them that property prices are going up.  Many sellers will then wonder why these price increases are not affecting their properties.  Why is this?

Because, as we have seen in the past few months, certain sectors of the market will be more active than others.  Until mortgage conditions become more favourable, we won't see much more activity in the 'lower end' of the market.  The very active areas will be the 'higher end' of the market: family homes and larger premium properties in traditionally desirable areas.  This will naturally skew the statistics and create an impression that house prices are rising if you look at the average selling prices of all properties that are sold.

Conclusion

The only conclusion to be drawn is actually that very little has changed in the past few months.  People haven't stopped buying properties because of the impending General Election.  Mortgage approvals haven't really gone up enough to make any difference to the property market.  The Stamp Duty exemption for First Time Buyers up to £250,000 hasn't really had any discernible effect on the market north of the border (average first time buyers don't buy properties THAT expensive). Prime properties and family homes continue to be in high demand and are still selling relatively quickly.  One bedroom flats continue to be in relatively low demand and will only sell if the price is right.

And what's the largest non-change in this period?  Politicians still won't answer the single largest question of our time: how are we actually going to reduce the national budget deficit AFTER the general election?  Since none of the major political parties have actually addressed this question in full (according to the Institute of Fiscal Studies) we can't actually know how the different political parties will actually cut the entire deficit.  Therefore, we will have to wait until AFTER the election to find out the answer to this question.  And until we have a clear answer to this question, we cannot have a clear picture of exactly how such budget cuts will affect the property market.

At that point, only one thing will happen with certainty: whatever the government decides to do (whatever political colours they may be wearing at that point), the other parties will then come out and reveal the policies that they will claim they had formed PRIOR to the election (but just neglected to tell us) and which, of course, will be the opposite of any unpopular policies that the government at that time introduces.

Meantime, I'm off to watch the final leaders' debate tonight and to scream loudly, with a few friends, 'answer the question!' at the telly.  Enjoy the rest of the campaign!

Property Market Update - March 2010

I'm going to divide this Property Market Update into two sections. First, a general market update which hopefully, as always, helps to give an ACTUAL take on what is happening in the property market rather than headline-grabbing statistics that can often be read in the newspapers. Second, I'll cover the new Stamp Duty regime, announced in the Chancellor's Budget last week.

General Property Market Update - March 2010 - Is Property Actually Selling and What's Happening to Property Prices?

Press reports are still mixed when it comes to what is happening in the property market in Scotland: depending on who you believe, prices are either going down again or they're going up. It's certainly hard to disagree with one side of that argument: the problem is deciding which side. Mortgage approvals have been reported as being lower than expected. Equally, lack of supply of new properties coming to the market is certainly causing prices to remain pretty stable, even if there isn't a huge leap in the number of buyers getting finance to buy a property.

From our point of view, the market is a lot healthier than it was this time last year. There is more listing activity (people putting their properties on the market) but there is equally more buying activity (people putting offers in on properties that we are marketing). The last thing we would want is to be building a stockpile of properties that remain unsold and thankfully the increase in 'listing' is also being matched by the increase in sales.

There is still a distinct difference between family homes and smaller flats in terms of activity levels.

My heart takes a little happy leap when I see a family home coming on the market with us. Why? Because I'm confident that we will have sold it within a couple of weeks. Property crisis: what crisis? That's certainly true in the family home (larger flats, semi-detached and detached houses) sector, particularly in well-established residential areas.

Having said that, activity in the one bedroom property market (true first time buyer territory) remains pretty flat (pardon the pun). Buyers in this sector of the market can afford to be quite choosy at the moment. As a result, we are seeing the very best examples of such properties selling quite quickly and generating a lot of interest: high ceilings, original Victorian or Georgian features, good room sizes, spacious bathrooms. On the other hand, slightly less well-looked-after examples are sitting on the market for quite some time. There certainly is a very good case to be made, at the moment, for putting some money into bringing your property right up to scratch before putting it on the market, if you are in this sector of the market. However, if you are going to put money into doing the flat up before sale, make sure to do it 'properly': one sure fire way of ensuring that your property doesn't sell is to do a half-hearted 'patch' job on it, inflate the price to take account of the 'renovation' and then watch as buyers bypass your property on the basis that they'd want to completely redo everything anyway.

First Time Buyers Now Pay No Stamp Duty on Property Up to £250,000 - What Will This Do to the Property Market in Scotland?

The Chancellor's last Budget before the General Election gave him one last opportunity to reveal some crowd-pleasing policies that would divert media attention, just briefly, from his slightly frightening Bond-villainesqe eyebrows. One of them in particular (policies, not eyebrows) was important to anyone who is involved in the property industry: the introduction of a Stamp Duty exemption for First Time Buyers on properties up to £250,000, in force for the next two years.

The argument behind this (and yes, I did actually read the entire Budget Report amongst very strong cups of coffee) was to stimulate the property market by encouraging First Time Buyers (FTBs) back to the property market. Without this lifeblood entering the market, the rest of the property market stalls.

So, will this work or is it just political grandstanding? Most particularly, will it have the desired effect in SCOTLAND? It's a Million Dollar Question but here's my take on things, for what it's worth.

I actually do think that the change to the Stamp Duty regime will have a positive effect on the property market in Scotland. We saw this during the last period of Stamp Duty 'holiday' where the threshold for Stamp Duty was temporarily raised from £125,000 to £175,000 and the removal of this exemption does seem to have caused the number of property purchases to have dropped slightly in Scotland.

However, I have a couple of major criticisms of this change to the Stamp Duty regime. For a full discussion of these points, please have a look at the full article on my personal Blog at: http://robert-carroll.co.uk/budget-2010-stamp-duty-cut-penalises-existing-home-owners/

First, and most importantly, it is completely discriminatory against people who already own a property. I accept that the market needs First Time Buyers for it to be healthy and that a healthy market benefits everyone involved in it. However, it seems perverse to me that a First Time Buyer will pay no Stamp Duty on a property of £200,000 and yet a family, struggling to move out of their 2 bed £120,000 flat to a £200,000 semi-detached house will have to pay around £2000 in Stamp Duty. A First Time Buyer who wants to buy a £200,000 property will probably need a £50,000 deposit and a salary of somewhere between £40,000 and £50,000 per year in order to get a decent mortgage rate. This is precisely the kind of person who probably doesn't need the tax break as much as the family whose finances are already stretched by having a child and who want to move out of their top floor flat into a semi-detached house. For them, the tax break could help them to scrape together the deposit that they need to move.

Second, it ignores the fact that the Stamp Duty bandings are completely unfair in the first place. Property prices have almost tripled in a decade and yet, not surprisingly, the Stamp Duty bandings have hardly changed. Is it fair that a first time buyer can purchase a property worth £249,000 without paying ANY Stamp Duty and yet Stamp Duty jumps from £0 to £7800 if they purchase a £260,000 property? Personally, I don't think so. I think that all of the Stamp Duty bandings need an overhaul to make them fairer. This latest measure in the Budget is a sticky plaster.

Third, this policy seems to be aimed squarely at gathering votes in the south east of England. My company's Head Office is in Edinburgh which along with Aberdeen has the highest average property price in Scotland. Even so, the average price of a property in Edinburgh is around £200,000. This means that the majority of Edinburgh's housing stock will now be stamp duty exempt for first time buyers. In other words, although this policy is allegedly aimed at First Time Buyers, for the majority of the UK and most certainly Scotland, the properties that now fall within the Stamp Duty exemption for First Time Buyers are not the types of properties that First Time Buyers actually buy. It's hard not to see this as being a policy that is aimed at young professionals in the south east of England who would most probably have been voting Conservative at the next election prior to this latest policy maybe making them think twice.

Fourth, this is going to cause a horrible 'concertina' effect on property prices around the Stamp Duty thresholds/bandings. Why? Even before this change, if your property was worth £265,000, you were struggling to get many buyers who would want to pay any more than £250,000 for it because buyers paid 1% Stamp Duty for a property of £250,000 but 3% for a property of £251,000. This led to an artificial compression of prices around £250,000 and a distorted market. Now it will be even more extreme. Previously, the difference in Stamp Duty payable between a £250,000 property and a £251,000 property was around £5000. Now it's £7500 (if you're a first time buyer, of course!). This can only lead to even more properties being artificially pushed below the £250,000 mark. How much over £250,000 is your property going to have to be worth before people don't even think, 'I'm not paying a penny over £250,000′ so that they can avoid paying nearly £8000 of Stamp Duty? I think it will be about £280,000. Therefore, if your property is worth £270,000 I honestly think there will be far less buyers prepared to go over the £250,000 mark in offering on your property.

Conclusion: the Stamp Duty changes seem to benefit a very small minority of First Time Buyers who are based in the more expensive south east of England. It also shouldn't be ignored too that people purchasing properties over £1,000,000 now will pay 5% Stamp Duty rather than 4% as they currently do, in order to fund this tax 'cut'. It will probably also have the effect of further concentrating property prices around the Stamp Duty thresholds/bandings, driving property prices down for people whose properties are worth between £251,000 and £280,000. The Stamp Duty regime remains unfair and it would surely have been preferable just to overhaul the Stamp Duty bandings altogether. But then that's not quite the same vote winner, is it?!