Property Prices Continue to Climb Across Scotland
Figures released in September 2017 by Registers by Scotland indicate that the average price of a property in Scotland for the month of July 2017 was £149,185, representing an increase of 4.8% on July of the previous year. The increase from June 2017 was reported as being 2.8%.
Commenting on the annual increase, Registers of Scotland’s Business Development and Information Director, Kenny Crawford, said: “Average prices in Scotland continued their upward trend in July with an increase of 4.8% when compared to July 2016. This represents the biggest percentage increase year-on-year since March 2015.”
Comparing this to the UK House Price Index (UK HPI), the increase in the average property price across the UK, from July 2016 to July 2017, was 5.8% with a monthly increase of 1.1% on June 2017.
There have been numerous commentators in the Press stating that the ongoing Brexit negotiations have been impacting negatively on the housing market in the UK and in Scotland. Based on these figures, it is hard to see that these claims are justified.
Supply Still Lagging Behind Demand
The latest figures released by ESPC in September 2017 showed that the number of properties sold in East Central Scotland between June and August 2017 increased by 5.9% when compared to the same period the year before.
In the same period, the number of properties coming to the market also increased by 1.9% comparison to last year.
Whilst any increase in the amount of stock available to buyers is welcome at the moment, it still lags behind the increase in sales and goes a long way to explaining the property price rises that we have seen in this part of Scotland in the past few months.
Bank of England Governor Hints that Interest Rates May Rise
In spite of Office for National Statistics figures indicating that Britain’s economy recorded its weakest annual growth rate since 2013 in the three months to the end of June, the Governor of the Bank of England gave a strong hint that interest rates could rise in the coming months.
The Guardian reported that the Governor, Mark Carney, took an upbeat view of the economic outlook in a recent radio interview, with the unemployment rate at a 42 year-low and robust retail sales figures being among the factors swaying this view. Carney stated that the Bank was ready to raise the cost of borrowing should the economy continue to show signs of strengthening, saying:
“All the indications are that it is – in the relatively near term you can expect that interest rates will increase”.
In a separate report, one of the members of the Bank of England’s rate-setting Monetary Policy Committee (MPC) stated that an increase in interest rates would be a ‘good news story’, according to The Independent.
The nine member MPC voted by a margin of 7-2 to keep rates on hold earlier in September. However, it also stated that, unless the economy showed a major deterioration, it would raise rates ‘over coming months’. If and when it happens, it would be the first rise in over a decade.
Whether a modest rise in interest rates would have a significant impact upon the property market in Scotland remains to be seen. For buyers, with interest rates and mortgage rates having been at historic lows for the past few years, it is arguable that a small increase would not put them off taking their first, or further steps, on the property ladder. For existing homeowners on variable rate mortgages who would otherwise have moved home had it not been for the unexpectedly low mortgage repayments that they have enjoyed over the past few years, it is possible that some of them may take an interest rate rise as a cue to get their home onto the market. This would go some way to addressing the shortage in supply versus demand and perhaps also take a bit of the sting out of the price rises that we have seen in the past couple of years.
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