Hmmm…so I had a meeting with a lady today who works with a lot of estate agents and she tilted her head sympathetically to one side and asked how things were going. She clearly expected the news to be dire! She seemed genuinely surprised to hear that things were going really well. The news she is hearing from most solicitors and estate agents at the moment must still be overwhelmingly negative.
The Press is reporting drops in mortgage lending and yet reporting rising house prices and lots of estate agents and solicitors still seem to be very down in the mouth, so it’s not surprising that people don’t really know what’s happening in the property market at the moment. My job here is to try and cut through this and to let you know exactly what is happening to the property market at the moment. So here goes…
Lending Down, Prices Up – What is the Press Are Saying About the Property Market?
- The average value of a house in Edinburgh was reported in the middle of February 2010 as being £201,687, up 11.4% on the last quarter, according to Lloyds TSB Scotland. However, property prices remained 8.9 % down when compared to January last year.
- Meantime, The Herald reported that the Scottish housing market is going to be slower to recover than the rest of UK. It reported that the Council of Mortgage Lenders said that the 47,000 loans advanced for house purchase in Scotland during 2009 was the lowest level since it began collecting data 16 years ago. The Council of Mortgage Lenders added that a gradual improvement in market conditions and the wider economy should support a modest increase in activity later in the year.
So, prices are rising or have risen recently. However, lending in Scotland is at a historical low. This would seemingly indicate a low demand for property, yet prices are rising. How does that work?
Question: Why Have Prices Risen Against a Backdrop of Apparently Low Buying Activity? Answer: Lack of New Properties on the Market and Increased Buyer Confidence
The beginning of the year has seen a number of our clients’ properties going to closing dates. One property that we sold recently attracted nearly 50 viewers in a two week period and multiple offers at the closing date. And it wasn’t even ‘Offers Over’! Some properties that have been on the market for quite a long time are suddenly generating interest in spite of the price not being reduced in the past few months. So, how does this sit with reports of record low lending and low demand?
I’d like to claim that it is due to us being fantastic estate agents. And that is of course partly true! However, a huge contribution to this return to health in the Edinburgh property market is the fact that there are more buyers out there than there were a few months ago.
This is not just a hunch. We are registering about 150 new property buyers per month on our database at the moment: more than this time last year. The total number of ‘active’ buyers on that database has grown on a month-by-month basis in the past few months. So the number of people LOOKING for a property is higher than the number of people who have FOUND a property and deregistered. It’s a modest increase, but as a well known supermarket says, every little helps!
However, how can property prices be going up when mortgage lending still appears to be so low? First, there’s a lack of SUPPLY: there doesn’t appear to have been an increase in the number of SELLERS wanting to put their properties on the market in the last few months. Second, there is more BUYER DEMAND: the BUYERS who ARE in the marketplace are more motivated to buy than they were a few months ago. Why? Press reports of property prices rising in the past few months mean that they are more confident to buy.
Therefore, when a nice property comes on the market, there is more competition amongst motivated buyers. It is a lack of that kind of competition in the last couple of years that has been causing house prices to slide.
Some sources claimed that a rush to beat the Stamp Duty change at the beginning of 2010 caused a stampede of buyers and therefore caused prices to rise, however the statistics don’t appear to show a spike in lending activity during this period so I’m not sure that I back this explanation. I think it genuinely is just a case of low supply of properties and higher, more motivated demand amongst buyers for those properties.
So, What Does This All Mean If You Are a Potential Property Seller or Buyer at the Moment?
If you have a nice property or one that will be keenly priced…now is probably the time to put it on the market!
We were, for a while in early 2010, selling more properties than we were putting on the market. This is entirely consistent with demand outstripping supply of new properties coming to the market.
We are currently seeing a spike in seller activity: 16 appraisals of new properties last week, most of which will be coming to the market quite shortly and another 10 or so appraisals so far this week. Spring is traditionally the time of year when people put their properties on the market so that’s not entirely surprising.
If our experience is typical, this increase in PROPERTY SUPPLY will perhaps balance-out the increase in BUYER DEMAND. This in due course should lead to some stabilisation of property prices. Time will tell and I will of course update you on this in my Monthly Property Market Update next month.
Meantime, property sellers in Edinburgh can only hope that some of the £1.3 billion of bonuses paid to RBS employees in the last couple of days will flow back into the property market and further stimulate demand!