February has been a good month for significant news about the property market, with important figures and predictions emerging. For our summary of the month’s important property news, read on!
Bank of England Governor Reports Improving Property Market – http://www.bbc.co.uk/news/business-26216141
At the end of January, the Governor of the Bank of England, Mark Carney, visited Edinburgh to address some of the movers and shakers of Scottish business. One of the MOV8 team was lucky enough to be invited to the lunch and listened attentively as Mr Carney spoke about his belief that interest rates would not rise to the pre-crisis level of around 5% until all spare capacity was being used in the economy. Mr Carney this week reiterated that sentiment, adding that the UK housing market is now in widespread recovery, two facts that will be music to the ears of homeowners around the country.
Figures for Scotland have been included in these stats, with Mr Carney describing the rise as a ‘generalised phenomenon’. Whilst we can assume that the housing market in Edinburgh and the Lothians is certainly recovering, these stats also include the South East of England, and most particularly London, where prices are rising at about 10% per year which of course distorts the overall picture.
David Marshall, analyst at the ESPC, East Central Scotland’s leading property marketing agency, is largely in agreement with Mark Carney’s analysis of the situation, as far as East Central Scotland is concerned:
“I would tend to agree with Mr Carney. London is very much the exception rather than the rule with regards to the levels of house price inflation they are experiencing, but in terms of the number of homes selling there has been a substantial increase. In the three months to January we’ve seen the number of homes selling rise by just over 61% across Edinburgh the Lothians and Fife.
Other metrics also reflect an improvement in the market, with selling times coming down and the percentage of homes achieving valuation rising. As we move forward we would expect buyer activity to continue to rise and as confidence improves we will start to see more homes coming onto the market which should help to moderate house price inflation.”
Whilst it’s great for house sellers to hear that prices are rising throughout the UK, we must of course remain cautious about the the speed at which they rise and the factors that contribute to that. I’ve been repeatedly saying for the past few months that the rate of demand for property is outstripping the rate of supply coming to the market in the areas that we focus our attentions on. This month so far (11 working days at the time of writing) has been no different, with 50 sales versus 30 listings (properties signing-up to come to the market). The risk of demand outstripping supply is that house prices will rise uncontrollably, though at the moment we are seeing more gradual increases in house prices. We have to hope that the Governor is right and that the rise in house prices in sustainable.
First Time Buyers Returning to the Market in Their Droves – http://www.bbc.co.uk/news/business-26151724
One reason that the demand continues to grow and, in Edinburgh and the Lothians at least, seems to be outstripping supply, is that First Time Buyers are returning to the market in what appears to be large numbers. In a statement released by The Council of Mortgage Lenders (CML), First Time Buyers are ‘driving the market forward’. The number of loans made to First Time Buyers in 2013 was up by 23% compared to 2012. The total number of First Time Buyer loans has hit 286,800. However, to put this all in context, the total amount of money borrowed by homeowners was still less than half what it was in 2007, at the high of the property boom.
Factors such as the Help To Buy scheme have encouraged First Times Buyers to seek out finance and purchase a property. Hopefully these statistics showing healthy demand for property will also encourage more sellers to come to the market so that we can readdress the demand versus supply issue we’re currently experiencing. It’s fantastic to speak to so many new First Time Buyers as they enquire about properties we’re marketing but we’d also love to have a fantastic choice of suitable properties for them to purchase!
But, Hang on…a Wave of Sellers is Coming to the Market Apparently…Can This Be True?! – http://www.theguardian.com/money/2014/feb/17/house-price-sellers-market-homes
Just when it seemed that demand was outstripping supply, contradictory reports surface in the Press that the bounce in the property market is actually encouraging a ‘wave’ (a technical term that is, helpfully for Press purposes, entirely unquantifiable) of sellers to come to the market. So, can this be true?
The Guardian recently reported that statistics from the UK’s number one property website, Rightmove, demonstrate that increases in asking prices have encouraged a wave of sellers to put their property on the market. The article explains that the average asking price for a property has jumped by £8,103, or £261 a day, in the past year, encouraging this increased number of potential sellers to take the plunge. Can this actually be true and is there really a flood (another technical term) of sellers coming to the market?
There are a few things to bear in mind that suggest that these figures should be taken with a pinch of salt. First, this information has been complied throughout the UK where London alone has risen by 10%. Secondly, this report was compiled by a property website based only on its information so, although it reflects a significant proportion of properties that are on the market, it doesn’t represent the whole of the market (particularly in Edinburgh and the Lothians where the proportion of properties advertised on Rightmove is lower than the national average). Third, asking prices are absolutely not the same as selling prices: all this shows is that seller confidence is rising across the UK, prompting a rise in the amount that sellers are hoping to achieve for their property sale. There’s a fine line between confidence and overconfidence in the market and of course the danger is that the gap between seller and buyer expectations stretches a little too far and causes the market to slow down.
As for the suggestion that ‘waves’ of property sellers are returning to the market, that certainly isn’t our experience in Edinburgh and the Lothians. For six months in a row we have sold more properties than we have put on the market. In short, sales activity is incredible at the moment and is a wonderful breath of fresh air when compared to the market we have seen in the past few years. However, as long as the supply to the market remains low, buyers will have very little choice and prices, particularly for popular property types in popular areas, will continue to rise. We will also continue to see a rise in the number of Closing Dates: that most hated of scenarios for property buyers (http://www.mov8realestate.com/blog/item/140-how-much-should-i-pay-at-a-closing-date-and-how-can-i-avoid-closing-dates.html). To paraphrase the famous army recruitment poster: ‘SELLERS! BUYERS need YOU!’
In summary, if you are a seller, you will find the property market to be in rude health at the moment. However, if you are a buyer, you might well be struggling to find a property that suits you and may be fed-up of losing-out on properties at closing dates. It’s a challenging environment at the moment and the return of confidence to the market doesn’t seem to be shared equally between seller and buyers at the moment. The sooner that sellers take the plunge into the market, in increased numbers, the better.
As always, if you’ve any questions or if you are thinking of selling your own property and want to know what you are likely to achieve for your sale, please get in touch with the experts in our Valuation Team. If you’ve any other questions about this article or anything else property-related, please just drop us a line!