We're (almost) home and dry on property
It's been a rollercoaster year in the housing sector, but Willie Hunter of the ESPC believes that the turbulence is behind us and looks forward to the market stabilising in 2010
WINTER woollies, the sound of sleigh-bells, German markets and the brief return of buses to Princes Street. It can only mean Christmas is round the corner and we're nearing the end of another year. And if you're thinking it feels like it only started yesterday, trust me, you're not alone!
It probably goes without saying that it's been a turbulent year for most people involved in the property market, from solicitor estate agents to homeowners themselves.
Constraints in mortgage lending, stamp duty holidays, historically low interest rates and many sellers experiencing home reports for the first time have all made the last 12 months something of a rollercoaster ride.
Early in 2009, there were few signs that we were set for such a hectic year; 2008 had seen a rush of properties coming on to the market in late November as many sellers sought to avoid the cost of a home report. As a result, relatively few homes were put up for sale in January and February and with things still slow on the sales side, the first month or two was quiet all round.
As the year progressed we saw a steady increase in sales activity, with many buyers attracted back to the market by lower house prices and historically low interest rates.
The number of homes selling in the Capital had fallen as low as 200 in February this year, but by July this figure had risen over the 500 mark for the month.
As buyer activity increased, this brought stability to home values in the Capital. The average house price in Edinburgh briefly dipped below 195,000 earlier in the year, but has risen steadily since then and now stands at just over 225,000. It's important to note that this increase in the average figure is partly due to an increase in the proportion of larger properties selling. The underlying trend, though, when looking at properties of similar size, is that values are inching upwards once more.
With prices stabilising, we also started to see an increase in activity from the supply side as more buyers were attracted back to the market. By the middle of the year, 600 to 700 properties were being brought to the market for sale – up from less than 200 in January. As an interesting aside, it appears that the introduction of home reports has had a significant impact on how sellers market their property.
Where previously most homes are marketed at either offers over or fixed price, sellers today are more often opting to set an asking price in line with the valuation in the home report and then invite offers around that value.
REGARDLESS of how people choose to market their home, though, an increase in supply should help to ensure that house price inflation is kept at more modest levels as we move forward. Keeping growth at more modest levels will be crucial as a return to the high levels of inflation we have witnessed in recent years would make it more difficult for first-time buyers to get on the property ladder and ultimately such growth would prove unsustainable over the longer term.
In simplistic terms, the year started quietly, but since then we've seen a steady increase in activity from both buyers and sellers. The market is still quieter than it was earlier in the decade but we're seeing considerably more properties being bought and sold than was the case last year. Similarly, whilst prices are now around 10 per cent below the levels witnessed at the peak of the market, values have stabilised earlier in the year and have even been inching up over the last few months.
The $64,000 question, of course, is what is going to happen in the coming year? In terms of the number of homes being bought and sold, we should see a steady improvement as the year progresses thanks to a combination of improved confidence, low interest rates and a rise in the number of available mortgage products. House prices will fluctuate somewhat from month-to-month, but at this stage the likelihood is that the value of properties in east central Scotland will be broadly unchanged on what we saw this year.
That is not to say that everything in the garden is rosy again for homeowners. The lower threshold for stamp duty will return from its current level of 175,000 to 125,000 in the new year and unemployment is also likely to rise further during the first half of 2010.
Clearly this will cool demand somewhat, and anyone expecting a rapid return to the levels of house price inflation we saw for much of the Noughties is likely to be disappointed. The picture is certainly a good deal brighter than it was 12 months ago and, after a turbulent period, continued stability in 2010 would be a welcome Christmas present for buyers and sellers alike.
• Willie Hunter is a non-executive director with the ESPC
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