House sales are surging but how long can it last? - David Alexander

What would be your response to a statement that the average price of a residential property, newly brought to the market, is now in the region of one-third of one million pounds?

Prices are rising in Scotland

Given that the source is the national property portal, Rightmove the reaction might be a typically cynical Scottish, “Aye, right”. Especially if you live in Methil or Airdrie.

And to some extent this would be understandable. When broken down into “nations and regions” of the UK, the average figure for Scotland is just under £170,000 and, of course, there will be many variables within that. It is – once again – London and the South-east of England that is pushing up the national average (although even within the UK capital there are huge variations, the lowest-priced borough, Enfield, returning an average figure of £333,000 compared to Kensington and Chelsea’s £1.526 million).

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Nevertheless, when it comes to the surge in prices in percentage terms, Scotland is up there with the rest of them; according to Rightmove the increase in April over March was 2.7 per cent, with an annual increase of 8.5pc, compared to 5.1pc across the UK as a whole. Sales in Scotland were taking an average of just 33 days.

David Alexander is managing director of DJ Alexander

According to Tim Bannister, Rightmove’s director of property data, the average UK price increase of 2.1pc in April over March was only the second time in the last five years that a month-on-month rise of over 2pc had been recorded.

Scotland’s performance, compared to many of the English regions, did surprise me given that 31 March saw a reduction in the LBTT concessions here while the stamp duty holiday continued south of the Border.

Still the other factors driving the market in England are in play here also. These include cheap mortgages and an increase in confidence brought about by the success of the covid vaccination roll out. “Social distancing” considerations, also related to covid, has also led to a desire for more space (outside as well as inside) beyond accommodating growing families. So there is an increased desire to upgrade from flats to terraced to semi-detached to detached housing. Some people are prepared to make a move for no other reason that they want a bigger garden, preferably with additional privacy.

Working at the property coalface, so to speak, I experience this confident atmosphere day and daily, which is good especially following the uncertainty that prevailed across the country at the start of the year. I would, however, add a note of caution. Although the government’s furlough scheme is being gradually downgraded many jobs are still dependent on it and we simply do not know what effect closure will have on unemployment figures. I suspect most of the current buyers are either employed in the public sector or one of the better-performing corporate or private organisations but there are some sectors of the latter – hospitality and leisure for one – where job security seems to be something of a shoogly peg.

Hopefully the effect on the housing market will not be too adverse but I doubt if the current surge in prices is sustainable (nor, indeed, desirable).

A friend whose daughter has been house-hunting in Lanarkshire reports being amazed at the level of prices currently being achieved by vendors even though the areas she has been searching are not particular “hot spots”. She is fortunate enough to be currently living in secure and good-value rental accommodation so has decided to put her task on hold until the autumn when a clearer picture of the longer-term future of the market is likely to emerge. By then she expects less choice but also less competition from other buyers, making it easier to make an informed decision in a calmer atmosphere.

For a larger number of buyers – especially those with no pressing need to move – that may also be the best strategy.

David Alexander is managing director of DJ Alexander

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