November is a month when the property market is traditionally seen to be putting its feet up, snuggling up under a warm blanket and hunkering-down for the winter. But in 2014, the market continues apace, with sales continuing to come through as buyers try to find their dream home before Christmas. So, what has been happening in the Scottish property market this past month? For your round-up for this month’s top stories, read on!
LBTT (Land and Buildings Transaction Tax) – Reaction Mixed
Reaction to LBTT has been mixed. LBTT is the replacement for Stamp Duty and it comes into force on 1 April 2015, for any property sale where the date of settlement (usually the Date of Entry) is on or after that date. In reality therefore, it will increasingly be affecting property sales that take place towards the end of 2014 and certainly the beginning of 2015.
For those focused on the higher-end of the market, there has been quite a lot of doom and gloom. The Telegraph this month reported fears that LBTT would cause a dip in activity at the upper end of the market: http://www.telegraph.co.uk/news/uknews/scotland/11224385/SNP-property-tax-will-set-housing-market-back-four-years.html
Others are choosing to see it in a slightly more positive light, stating that people at the higher end of the market are rushing to get their properties onto the market before the new LBTT regime takes effect in order to attract more buyers: http://www.thisismoney.co.uk/money/news/article-2826729/Rich-Scottish-property-owners-dash-sell-home-tax-rises-loom.html
Our take on it is that, as around 95% of property buyers will pay less purchase tax on their new property, it is more likely to stimulate property market activity rather than dampen it. The ‘tipping-point’ is about £320,000: up to that point, you will pay less tax. Indeed, at the parts of the market around the existing cut-off points for Stamp Duty, the savings are potentially several hundred or even thousands of pounds. With Edinburgh’s average property price being around £220,000, even in the most expensive cities in Scotland it is likely that the average buyer will pay less tax. So, overall, the effect should be positive. At the upper end of the market though, there definitely will be more pressure on buyers who will have to have more cash available when purchasing: that is unlikely to have a positive effect, of course. For our full article on LBTT, click here: http://www.mov8realestate.com/2014/10/land-buildings-transaction-tax-replace-stamp-duty-scotland-2015/
House Prices On the Rise
The ESPC monthly market report in October 2014 reported that all key areas of the property market were on the up (http://www.espc.com/news/house-price-report-october-2014 ). The report stated:
“We’ve seen a steady upturn improvement in the property market since the middle of 2013 and that trend has continued into October with the number of sales and new instructions both higher than was the case a year ago. The level of activity we saw between August and October was the highest we’ve seen during that period since 2007…”.
That positive trend was also noted by data from Registers of Scotland (http://www.propertywire.com/news/europe/scotland-real-estate-prices-201411039773.html) which reported that Scottish houses prices are at their highest level since records began. The average house price in Scotland in the second quarter of 2014 was £170,190, up 5.2% on the same period in 2013, the highest figure since Registers of Scotland began compiling quarterly house price statistics in 2003.
From July to September this year, the total volume of sales was also up, with an increase of 9.1% on the same quarter in the previous year. This figure represents the highest volume of sales for any quarter since quarter one of 2008/2009.
Interest Rates Staying Where They Are
Interest rate news was also positive for borrowers, though not so much for savers, with the general consensus seeming to be that we will not see a rise in interest rates in early 2015, something that many analysts were predicting just a few months ago.
HSBC’s chief UK economist predicted that rates might not rise until early 2016 (http://www.ibtimes.co.uk/uk-interest-rate-hike-will-happen-2016-due-weak-economic-growth-general-election-1475208 ) with the Guardian predicting that it will be later in 2015, at least (http://www.theguardian.com/business/2014/nov/12/interest-rates-held-october-2015-inflation-below-1-percent ).
What are We Seeing Happening in the Property Market?
There is no doubt that seller activity has dropped in November, with sellers believing that the property market cools in the winter. The reality is that there are still loads of buyers out there: they don’t stop looking just because the nights draw in a bit. So, if you’re thinking of selling, it’s definitely worth taking advantage of the winter months when the proportion of properties selling actually is higher than it is in spring.
Speaking to other people in the industry, there is a feeling that a bit of hesitation might be creeping-in to buyers’ minds at the moment because of the Stamp Duty changes mentioned above, with buyers waiting until the LBTT regime kicks-in to save money on their purchase. It’s probably worth noting that, as a buyer, with property prices rising at the rate they are, any saving in LBTT versus Stamp Duty could well be swallowed, and more, by an increase in property prices in the meantime, so it’s definitely worth bearing that in mind when making a decision about whether or not to wait for a settlement date after 1 April 2015.
As always, if you have any questions about this month’s property market update, we’ll be delighted to help so, whether you are thinking of buying or selling, don’t hesitate to get in touch with us!