Property cycles are inevitable and can follow a well-worn path, but with the financial meltdown of 2008 still vivid in our memories, heeding the lessons of the past is vitally important. It will not only set the canny buyer and seller apart, but it will also distinguish the good property adviser from the not so good.
We have seen the number of sales running neck and neck with registrations for the first nine months of the year. Over two thirds of all properties have sold above their home report valuation and in EH10, where Hunters Residential is predominant, prices of a two bedroom flat have risen by nearly 11 per cent over the past 12 months to an average of £265,937.
For properties sold in Edinburgh during the current year, the average selling time is thirty two days, half that for 2013.
So the sense of optimism is definitely growing. The options for those looking to move, however, are not necessarily increasing which is why talk of improvement in the property market comes with caveats.
First time buyers are being persuaded back into the market and there are good value properties to tempt them. The government is following up its successful Help to Buy initiative for new builds, with its new Isa. From December for every £200 a month squirrelled away this Isa, the government will add £50 - to a maximum £3,000 for £12,000 of savings. The options therefore are encouraging and in Edinburgh the right properties are close to the centre because of their onward value.
For those looking to make their next move, it becomes a little hazier. It is too early to assess the impact of the new Land and Business Transaction Tax (LBTT). Unquestionably the top end market is unusually slow at the moment. However, that may simply be a side effect of the significantly increased number of sales at the start of the year before LBTT was introduced. Only once we have a chance to compare top end transactions in 2016 with those in 2014 will we know for sure the impact.
The quantity of family homes coming on to the market is not enough to satisfy those wanting to move, especially those in the catchment for popular schools. A quick look at three bedroom houses in Morningside shows that they are in as much demand as ever and prices have risen on average by 14.5 per cent.
Figures show 120,000 homes were built last year, an increase on 2013 but still only half the 240,000 experts say are needed to deal with the UK’s shortage. It seems inconceivable that supply will meet demand any time soon so prices continue to rise. Yet one of the biggest mistakes a seller can make is to over-value their home. Competitive pricing generates competition and that is what will increase your sale price. To keep the market moving sensibly we need more homes on the market and a reality check.
Whereas we had returned to sensible lending rates of 2.5 or 3 times salary income after 2008, lenders are again offering an array new funding and mortgage products which could quickly prove unrealistic if interest rates rise. The basis of lending must always be what the borrower can afford - not what he or she would like to borrow.
What’s wrong with the simple but prudent approach of saving for a home?
I may sound old fashioned, but I believe a more measured and informed approach to buying and selling – born out of past experience – is the only way to create some stability.
Wilson Hunter is partner at Hunters Residential, the estate agency and conveyancing arm of Gillespie Macandrew.