Supply crisis creates ‘perfect storm’ in property market

THERE is a crisis in the housing market in some parts of Scotland as buyers shy away from putting their homes up for sale amid fears they will be unable to find anywhere to move to.

Estate agents and property experts have warned that the situation, fuelled by high demand for properties – particularly in Edinburgh and the Lothians – is pushing prices higher as buyers battle for the few homes on the market. Experts told of homes which had sold in days for almost 50 per cent over the asking price – as well as one with 43 offers under the sealed bid process.

While the capital is seeing the most extreme selling conditions, parts of Glasgow and Perthshire are also experiencing a property bubble, according to the Scottish Solicitors Property Centres (SSPC).

Paul Hilton, chief executive of the Edinburgh Solicitors Property Centre (ESPC), said that the number of properties on its website was down more than a third compared with the same time last year.

The average property selling price in Edinburgh is 101 per cent of the typical property’s Home Report valuation, he said.

“We have reached another perfect storm here in terms of property,” he said. “We are now seeing around 85 per cent of properties coming on as offers over – something which went right down after the recession in 2008.

“What is happening a lot is that people are thinking there is not much for sale, so want to wait to find something to buy before they put their own home on the market.”

One “doer-upper” two-bedroom flat, in the Gorgie district of Edinburgh, attracted more than 70 booked viewings, plus numerous extra house hunters in two open viewings in just two weeks on sale at offers over £125,000.

Attracting 43 bids, the property eventually sold for £186,000 – 49 per cent over the original offers over price.

“I thought, ‘Is there gold underneath this property?’” said Hilton. “This kind of level is not the norm, but it is happening.”

It is thought that current conditions may be being fuelled by a buy-to-let boom, driven by new legislation due to come in at the beginning of April, which will see an additional supplement of 3 per cent of the purchase price of the property for second-home buyers, on top of the existing Land and Buildings Transaction Tax (LBTT).

“I hope we will see a levelling off after April. No-one wants to see a boom and bust,” added Hilton.

Mov8 Real Estate, Edinburgh’s biggest estate agent by volume of listings and sales, said that during the fourth quarter of 2015, the number of homes it sold exceeded new listings by 57 per cent, while almost two-thirds of homes sold in the city during the three months to January met or exceeded the Home Report valuation, against 53 per cent during the same period a year ago.

Mov8 managing director Robert Carroll warned that if potential property sellers wait until they have found their ideal new house before putting their own property up for sale, the whole market could grind to a halt.

He said: “If the quantity of properties selling continues to outstrip the supply of new properties coming to the market, there is a danger that it will drive prices sharply upwards, making it even harder for property buyers.”

At the Glasgow Solicitors Property Centre, there has been an 8.1 per cent decrease in new homes on the market year on year, while average prices have increased by 3.3 per cent year on year, from £124,362 in 2014 to £128,514. This has been driven by a high demand for properties in the west end, which are selling faster than anywhere else in the city.

Mark Hordern, chief executive at estate agency Pacitti Jones, said: “Sales in and around Glasgow are running ahead of new instructions, limiting choice for buyers and creating competition for good quality properties. Closing dates are becoming increasingly commonplace and the great majority of properties are selling for their Home Report value or above.”

In Perthshire, demand for new properties is high, but agents warned stock levels are low. The number of properties brought to market has decreased by 22.3 per cent year on year, when comparing 2014 with 2015, partly leading to a 7.7 per cent rise in average prices in 2015, from £165,583 in 2014 to £178,281.

A spokesman for Perth Solicitors Property Centre said properties were selling fast, but that the region had not yet seen the increase in price over the Home Report valuation that sellers are achieving in Edinburgh.

However, in Aberdeenshire, where the property market is traditionally buoyant, the fall in the price of oil has hit the value of homes hard.

The area has seen a decrease in demand for properties, while 5.9 per cent more homes than last year have been put on the market, which estate agents believe is the result of those within the oil industry moving away. Average prices have dropped by 2.4 per cent year on year, from £233,098 in 2014 to £227,407 in 2015.