Ho, ho, ho! It’s the Festive edition of our Property Market update. Now, we COULD go through the various statistics and headlines from the property market in 2013, regurgitating work that we have already done and counting down, from Number 50 to Number 1, the best moments of the year. But that’s slightly lazy in all honesty. So we’ll leave that to Channel 4 and Channel 5 (I do love the Big Fat Quiz of the Year, all that being said) and take a different approach. Instead, how about we look forwards instead of backwards? What’s going to happen in the Scottish property market in 2014 and why? If you’re interested, read on…
Sales Volumes – Through the Roof or Through the Floor in 2014?
In short, I think that sales volumes will continue to grow in 2014: the trend throughout the year has been of the number of sales going up.
Registers of Scotland figures earlier this year suggested that sales numbers were up 22.5% compared to the same period in the previous year, the highest quarterly rise recorded by Registers of Scotland since 2008. ESPC figures, interestingly, which cover only part of Scotland where its members operate (mainly Edinburgh, the Lothians and Fife) show almost identical figures (to within 1%) so it looks like this trend is not being distorted simply by one run-away area.
Various factors have been at play here, including the government’s Help to Buy scheme, launched earlier in the year. This, along with increased buyer confidence (something you can’t really quantify or put a figure on, but which you absolutely can feel if you work within the industry), more favourable lending conditions by mortgage lenders and slightly more positive general economic news, have all helped things to pick-up.
Put simply, we have been manically busy in the run-up to Christmas and this is a sign of what is to come in 2014. Normally, the moment that the Christmas tree is brought out of the office basement storage area, it is surrounded quicker than a hunk of meat in a pool of piranhas. This year, days passed until it was decorated, with all of our attentions being concentrated on servicing our sellers as offers came flying in left, right and centre. We have not seen anything like that in the run up to the Festive Period in several years. We aren’t complaining, but the eggnog and Christmas log remains untouched.
I cannot see this abating in 2014. The Help to Buy scheme will only get more attention and wider-spread awareness amongst the property buying public as time goes on. Lenders continue to see the benefits for themselves in offering these government-backed loans and new-build developers continue to shift units on the basis of shared equity schemes that are effectively backed by the Scottish Government. I don’t see any massive economic headwinds looming in 2014: the ‘Usual Suspects’ within the Eurozone (Greece, Spain, Italy et al) don’t seem to be any more or less of an economic basket-case than they have been for the past few years. I have studiously avoided The ‘I’ Word in this forum as this isn’t a political column but whatever your views on Scottish Independence (there, I said it!), the vote is late in the year and, whatever side people vote for, they will be doing so because they think that it’s the best option for the country and the economy: so until one side loses and some people interpret this as the precursor to economic armageddon, I can’t see it having too large an effect on the property market in 2014 (plus, of course, nothing fundamentally or structurally changes immediately anyway, regardless of the result of the vote).
Property Prices in Scotland in 2014 – Up or Down, and How Much?
If you are tight on time and need to dash out to buy last minute presents, here’s the potted summary: I predict that property prices will go up, and the amount depends on whether sellers decide to join buyers in believing that now is actually a good time to be selling a property. Why? Thank you for asking: I’ve justified this statement immediately below!
Reports from Registers of Scotland in October suggested that property prices in Scotland were up 1.5% compared to the same period the year before. That gentle rise is pretty-much in line with what I would have reported that we have seen with our own eyes in the main geographic area that we cover (Edinburgh and the Lothians).
So, what will happen in 2014? What’s been interesting in 2013 has been that a surge in demand has not been matched by a surge in supply: in other words, for all the buyers out there, and the increase in sales, there hasn’t been as large a rise in the number of sellers putting their properties on the market. The statistics we have for Edinburgh, the Lothians, and parts of Fife for 2013 (to end of November) are that sales are up about 23% but ‘listings’ (new properties coming to the market) are only up about 9%. At this time of year, in particular, that gap is larger and the effect of short supply is even more acute: properties that have been sitting around for some time, gathering not too much attention, are getting far more interest.
So, what does this mean for property prices in 2014? Well, I think there is a chance that we might see prices rising faster than they did this year. And, you might be surprised to know, I’m not a fan of this happening. Why?
When there is any kind of imbalance between supply and demand, prices tend either to rise or fall. When demand is outstripping supply, as it currently is, you tend to see prices going up. This year, that rise has been quite modest. However, my feeling is that demand, fuelled by Help to Buy and increased buyer confidence, will continue to outstrip supply: put simply, sellers just don’t seem as keen to try to sell their properties as buyers seem to be to buy one. That gives me some concerns that, particularly for really good properties in good areas, we could see a bit of a feeding frenzy and a return to the days of multiple closing dates. Closing dates, where multiple buyers bid against each other for a property, tends to fuel over-bidding on those properties. And that of course pushes average prices up.
This news of average property prices rising, based on these select, high demand properties, makes buyers tempted to bid more on more average properties because they feel that they are buying in a rising market, so they don’t pinch the pennies quite as much as they would previously have done. This then becomes a bit of a self-fulfilling prophecy and prices continue to rise across the board.
Why don’t I want to see this? First, we represent buyers as well as sellers and it’s heartbreaking representing people who are losing-out at multiple closing dates. Second, we are most interested in a balanced property market rather than run-away inflation: we have operated in an overheated property market a few years ago and of course it all ended in tears for a lot of people.
My hope therefore is that supply increases and that the increased number of sales is accompanied by a growing belief amongst property sellers that their property is going to sell and that they are going to get a good price: both of which are now true in most cases! This should hopefully lead to equilibrium in the property market in 2014 that will translate into some stability in property prices and create further increased confidence without causing any run-away price inflation.
What Do You Think About These Predictions?
We’d be really interested to hear what you think about these predictions. Are they overly conservative or do you feel that we are being overly bullish? If you have any comments, please head to our Twitter (www.twitter.com/mov8realestate) or Facebook Pages (www.facebook.com/mov8realestate) and leave your comments beside the article!
Meantime, can I please wish you a very, very Merry Christmas and a Happy New Year and we look forward to catching up with you in 2014!