Today’s monthly RICS (Royal Institute of Chartered Surveyors) UK Housing Market Survey presented some good signs for encouragement for anyone who is interested in buying or selling a property in Scotland.
Why Does the RICS Survey Matter?
The RICS Survey gathers the opinions of chartered surveyors towards the state of the UK housing market every month. Essentially it matters because the attitude of chartered surveyors towards the housing market affects property prices.
Why? If ten buyers think that a property is worth £200,000 and are prepared to pay £200,000 for it, they will be struggling to pay £200,000 for it if surveyors think that it’s worth £180,000. If a surveyor values the property at £180,000 then the buyer’s mortgage lender will usually only be able to lend money based on the lower of the purchase price or the surveyor’s mortgage valuation.
So even if all these buyers WANT to pay £200,000, if they can only get a mortgage for £180,000, they will be struggling to get the funds to actually pay £200,000 for it. In short, if surveyors are pessimistic about property values then it will put downward pressure on house prices. Or, put another way, the attitude of surveyors towards property values can either push property values up or down.
So What Are Surveyors in Scotland Saying About Property Prices?
First, a caveat: these figures are based on the whole of Scotland which is seen as a single ‘region’ in the RICS survey (cue much gnashing of teeth amongst SNP voters!). Of course, some areas of Scotland are faring much better than others in the current property market conditions. The east of Scotland, for example, seems to have healthier house price trends in the past few years than the west. So that caveat out of the way…
The survey is based on the opinion of surveyors. It measures the percentage of surveyors whose opinion is that property prices are falling, remaining static or rising. In October, the percentage of surveyors who thought that prices were static in the past 3 months was 61. In November, it is 66. Of those who feel that property prices are falling, 29 percent thought that prices, if they had fallen, had fallen between 0% and 2%. In the interviews at the end of the survey, Scottish chartered surveyors indicated good activity in the marketplace in terms of purchases. In addition, new buyer enquiries, new vendor instructions and agreed sales were all in positive territory, with surveyors feeling that numbers were up.
Throughout the UK, the trend since 2011 has been increasingly positive or, put another way, has been increasingly less negative: in other words, the proportion of surveyors who feel that prices are going to fall in the coming 12 months versus those who feel that prices are going to rise is closing, with surveyors increasingly veering towards house price stability.
In brief, whilst surveyors are not getting carried away, their attitude towards what is happening with house prices and what is going to happen to house prices in the coming months has softened.
Does This Bode Well For the Scottish Property Market?
In short, yes. We have seen a few property sales hit the rocks in recent years because surveyors have not actually been prepared to value the property at a level that the buyer has been prepared to pay. In a way, they are overruling the market.
Since surveyors have such a significant influence on property prices and the ability of properties to actually sell, if they feel more positive about the movement of house prices this will almost certainly translate into less cautious, defensive surveys. If they are more confident that their valuation isn’t going to look silly and wind them up in litigation with a lender in a few years time, they are going to be less likely to come back with a surprisingly low valuation.
And that is going to help vendors in Scotland to get the prices that they feel that their properties are worth and help to maintain the current good momentum that we are seeing in terms of buyer activity in the Scottish property market.