Expect the unexpected in the housing market - Phil Harris

The 2022 Scottish Housing market and in particular that of Edinburgh, Glasgow and its surrounding areas seemed set in late summer to be ready to coast to the end of the year in relatively good fettle; however, like December’s football World Cup Final, there was some unforeseen drama ahead.

The impact of the UK being headed up by three Prime Ministers in just over six weeks, a challenging economy and the biggest interest rate rise in several years lead to many mortgage products being pulled, with a similar negative reaction in the financial markets. Coupled with a growing cost of living crisis, where did the Scottish Housing market end the year and what can we expect from 2023?

Interest in the property market remained strong according to the year-end data from the ESPC. Last month it noted: “Activity levels for this time of year are very close to those seen in 2019, which was really the last year of normality before the pandemic, so this should provide some reassurance to buyers that the market is continuing to perform well despite speculation to the contrary.”

This was backed up by figures produced for the final quarter of the year; the average selling price of property across Edinburgh, the Lothians, Fife and the Borders rose 8.8 per cent year-on-year to £294,419, with properties attaining 107 per cent of their Home Report valuations at sale, and 89.7 per cent of properties selling for their Home Report valuation or higher. It is also worth noting that closing dates remain particularly popular in the major cities, with 31.4 per cent of properties selling by this route.

Phil Harris is Legal Director, Shepherd and Wedderburn

Between September and November 2022, new property listings in Edinburgh, the Lothians, Fife, and the Borders were down slightly (2.3 per cent) year-on-year. Volumes remained relatively steady indicating seller confidence towards the end of the year.

Buyers were still keen to secure their next home between September and November 2022, with the average selling price across Edinburgh, the Lothians, Fife and the Borders increasing by 8.8 per cent year-on-year to £294,419. East Fife and West Lothian recorded some of the highest price increases over the last three months. The average selling price for homes in East Fife was £319,633, an increase of 25.2 per cent annually, while property in West Lothian had an average selling price of £251,735, up 13.3 per cent year-on-year. The City of Edinburgh saw average property selling prices rise 7.8 per cent annually to £308,868. Following high demand for properties in the past year, two-bedroom flats were popular with Edinburgh buyers.

Many popular first-time buyer areas in the capital saw significant rises in average selling prices. The average selling prices in Meadowbank, South Queensferry, Blackhall and Portobello increased by between 13 and 17 per cent.

Looking forward to 2023, despite the recent political and economic uncertainty, the latest data from ESPC highlights that there is the potential to see continued strong interest in home buying and selling over the coming year, particularly in Edinburgh and Glasgow. Having said that, with the increase in the Additional Dwelling Supplement (ADS) from 4 to 6 per cent in late December, and signs of volumes dropping back to pre-pandemic levels, some form of pullback in prices is anticipated in the year ahead. Many of the major independent estate agents are anticipating average sale prices pulling back by between 5 and 10 per cent in the coming 12 months. It is worth nothing however, that any pullback is to be viewed as potentially short term and part of a net growth period over the coming years.

Of particular concern to the market is the fact that most higher loan to value (LTV) mortgage products remain in short supply. Products at 75 to 85 per cent LTV are around 66 per cent of previous levels as of late 2022, with products at LTVs of 90 per cent and above sitting at only 47 per cent of pre-mini budget levels. Coupled with this, the latest set of GDP figures showed the UK headed further into recession than anticipated which will add to pressure on house prices across the country. If we have learnt anything from 2022, and indeed from 2020/21, we should expect the unexpected for the coming year.

Phil Harris is Legal Director, Shepherd and Wedderburn