2018 has been a strong year for Scotland’s property sellers, with prices generally rising and selling times falling. But with Brexit on the horizon, what is 2019 going to look like?
We look back at the main news from 2018 and predict what we are going to see happening in the Scottish property market in 2019.
Review of 2018
Scotland’s residential property market has been buoyant throughout 2018 despite the UK’s uncertain economic and political climate. The housing market in Scotland has outperformed most regions within the UK and has all the indicators of a healthy property market.
A steady rise in property prices has been a key trend this year. This has been coupled with a drop in the number of properties coming to the market and, as a result, the number of homes sold. The second half of 2018 saw encouraging signs of an increase in properties coming to market.
Lower stock levels have inevitably led to more competition and have driven prices up. The level of competition has caused significant challenges for property buyers who have increasingly found themselves losing-out at Closing Dates.
An increase in offers being made ‘Subject to Sale’ has become apparent in the past few months and this makes for some shakier ‘chains’ where, effectively, everyone’s sale or purchase in the ‘chain’ becomes dependent on one party’s ability to sell their own property.
For sellers it has been an excellent year. Property prices have hit record highs in parts of the country and selling times have remained very quick versus just a few years ago.
More than ever this year, we have seen a bottleneck of conveyancing transactions in December, with more sellers and buyers than ever before wanting their deal concluded before Christmas and seeking to bring forward Dates of Entry. Speaking with colleagues at other solicitor firms, this appears to have been a trend across the board.
Some sectors of the market have been more sluggish. The ‘prime’ or ‘super prime’ market has been hit by the change from Stamp Duty to Land and Buildings Transaction Tax (LBTT) a few years ago. With LBTT on a £750,000 property being £48,350 versus the historical Stamp Duty payment of £30,000, it’s not hard to see why people living in ‘prime’ properties are more likely to improve rather than to move house. As a result, the cost of building works and home renovations has also taken a hike in recent times.
Interest rates rose in August 2018 for only the second time in a decade, from 0.5% to 0.75%. The Bank of England indicated that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent and the 0.25% increase does not seem to have had any significant impact on the property market. Further information about the interest rate rise can be found here.
A new tax relief for first-time property buyers came into effect in Scotland in June. The threshold for Land and Buildings Transaction Tax ( LBTT) (the Scottish version of Stamp Duty) is now £175,000 rather than £145,000. However, first-time buyers of properties over £175,000 also benefit from the relief.
The Scottish government announced in its budget on 12 December 2018 that it plans to increase the current 3% rate of Additional Dwelling Supplement (ADS) to 4% from 25 January 2019. We remain of the belief that the tax is counterproductive and does not achieve the laudable aims of helping people to get onto, and to climb, the property ladder.
Scotland has bucked the UK housing market trends in 2018. East Central Scotland, and Edinburgh in particular, continues to perform well with high demand from buyers driving up selling prices. In the West of Scotland, Glasgow has the fastest house price growth of major UK cities and and properties remain relatively affordable when compared to the rest of the UK. As the market improves in the north of the UK, it’s a different story in the south where house prices in London and the South of England have dipped. After years of non-stop growth in the South of England, it may be that Scotland is going to become more attractive to property investors looking to maximise their returns.
Looking Ahead to 2019
The outlook for property sellers in 2019 remains positive, in spite of Brexit’s long shadow.
Brexit doesn’t seem to have dampened people’s enthusiasm for home ownership in Scotland. Homebuyers continue to move because they need to as a result of personal circumstances changing or simply because they really want to. Availability of funding from the main banks and building societies continues to be strong and interest rates remain attractive. With rents across Scotland rising, the ongoing cost of home ownership versus rental presents a compelling argument for ownership. Not to mention, of course, that the UK has some of the highest rates of home ownership in Europe and that people in the UK, more than many places in the world, grow-up with a strong, emotional desire to one day own their own home.
Markets tend to price-in known, future economic events. As a result, current property prices are likely to be reflective of any pessimism that already exists about how the property market might fare after Brexit negotiations are complete.
In the absence of a crystal ball, the true impact of Brexit won’t be known for some time yet, however there is nothing to suggest that the current conditions are going to change any time soon or that the current seller’s market is nearing a close. This year’s interest rate and tax changes have had little effect on the property market and any interest rate changes in 2019 are likely to be minimal. The increase in average selling prices in many areas of Scotland indicates that there continues to be strong demand from buyers.
For buyers, although the number of new properties coming to the market is significantly lower than a decade ago, there are encouraging signs of an upswing in properties coming to market in Scotland.
We expect to see a continuation of the trend for buyers to be submitting offers ‘Subject to Sale’. This is not a very welcome development from sellers’ and solicitors’ points of view. Sales are far more likely to fall through when they are so dependent on something completely out of the seller’s or solicitor’s control. However, when the best offer on the table is from someone who is in this position, it’s difficult for property sellers to look past the size of the offer and see the inherent risks.
So it’s out with the old and in with the new and we look forward to a busy year ahead!
We wish you a very Merry Christmas and a happy New Year and look forward to speaking with you in 2019.
If you are thinking of selling your home or investment property, get in touch with us by calling 0345 646 0208 (Option 1) or by emailing [email protected] to organise a free valuation of your home or to get a full, transparent breakdown of the costs of selling your home.
If you are looking to buy a property as a home or investment, please call 0345 646 0208 (Option 2) or email [email protected] and we will be happy to help.