A very Happy New Year to you from everyone at MOV8 Real Estate! We hope that you’ve had a great start to the year and that you’ve managed to stick to your resolutions so far.
As predicted in our last market update, we received a record amount of enquiries in the week between Christmas and New Year and were thankful (at least, the people coming back to the office on 3 January were thankful!) that we had staffed our offices between Christmas and New Year! That momentum has carried-through to January where we’ve seen record levels of activity across the board, from people thinking of selling to people submitting offers. So now that we’re well and truly into 2014, what can we learn from this first month and what has the Press been telling us to expect from the property market for the rest of the year?
Office of National Statistics Reports National House Price Growth and Competition in the Mortgage Market Hots-Up
The Office of National Statistics (ONS) has reported year on year growth throughout the country, according to their report released at the end of last year: (http://www.bbc.co.uk/news/business-25725899).
They’ve also been sensible enough to break it down into area too, rather than letting the artificially high price rises in London account for the good figures. London and the south east do continue to rise at an alarming rate. However, in Scotland the growth is a lot more sensible and comfortable.
The ONS reports a rise of 2.5% in Scotland compared with last year’s figure. This is great news for homeowners everywhere because price rises have now overtaken the increasing cost of living. Inflation currently sits at 2.1% meaning that annual house price growth rose higher than the cost of living in November.
Barclays also recently entered the 95% mortgage market, increasing competition in that market and which can only be to the benefit of borrowers: (http://www.theguardian.com/money/2014/jan/19/help-buy-mortgage-competition-barclays).
I’m happy to report that we’re seeing this steady price increase across all areas where we market properties (Edinburgh and the Lothians). With the Help To Buy scheme well under way and lenders appearing more confident in their lending criteria, buyers do appear to be coming back to the market.
However whilst this may appear to be good news it could have serious repercussions if we don’t soon start to see an address in the supply and demand.
Property Prices in 2014? Supply vs Demand Will Be The Key
As I’ve reported before, the balance of supply and demand chain needs to sort itself out for the overall health of the property market in Scotland. It is of course excellent news for the market that buyers are coming back to the market. However, if that demand continues to outstrip the number of properties coming to market we’ll see artificially raised prices. Whilst this is good for a limited number of sellers, it is not so great for the buyers who miss-out at the ever-increasing number of closing dates or who, ultimately, are priced-out of the market by artificially-high property prices. Essentially, there is the risk of a mini housing bubble. something I commented on in a Scotsman article recently: http://www.scotsman.com/business/finance/mmr-changes-may-prevent-scottish-housing-bubble-1-3248732
Already in 2014 we have seen a far higher number of agreed sales compared with the number of sellers who have decided to put their properties on the market. At the time of writing (well before the end of the month) this ratio was 60 agreed sales versus 44 properties signing-up to come to the market (in other words, 136% of sales versus listings). In November and December of 2013, those figures were 117% and 110% of sales versus listings. Put simply, this leads to a scarcity mentality amongst buyers and that panic will push prices up. For the time being, that increase is controlled but my own feeling is that, if this imbalance continues, it won’t remain that way and we are more likely to see what is happening in the south east of England.
Are you thinking of selling a property? If you are, this is great news for you and, if you’re thinking of selling, I’d recommend that now is the best time that there has been for several years. Spring always sees a flood of properties to the market as sellers seek to take advantage of the longer evenings and brighter days. However, that only has the effect of giving buyers more choice: great for buyers but not so good if you are a seller!
Are you thinking of buying? If you are, it’s a bit more difficult to advise what is the best course of action. Do you buy now, when there is less choice than in Spring, but decrease your risk of property prices continuing to rise and to become unaffordable? Or do you wait until Spring when there is more choice and hopefully, from your point of view, the increase in supply helps to satisfy demand and calm property prices down a bit? For what it is worth, my own advice would be that if you find a property that you like and that seems to be affordable for you, it’s irrelevant whether it’s now or in Spring.
My hope is that, as the market rises and sellers become more confident in the market, more sellers will decide to put their properties on the market and that this will satisfy the increased demand, helping to create stability in the market and for price rises to be matched to the rate of inflation/the increase in the cost of living. The property market has been an unpredictable roller-coaster since the crash of 2008 and stability and a degree of certainty would be welcome for everyone. The signs are there that this is going to be the case, but check-in again next month to find out if that is what we are seeing happening then!