Monthly Market Update October 2015
As we move into the final quarter of 2015, property sales across Edinburgh and the Lothians have remained strong. Throughout the year, the number of homes changing hands has been at its highest level since the onset of the ‘credit crunch’ in 2008. The latest figures released by ESPC show that in the three months from July to September alone, more than 3,200 homes were sold, up by 12.4% compared to the same period last year. It is an increase that we are certainly seeing here at MOV8 with 1,150 properties sold, so far, in 2015.
In Edinburgh, the majority of homes that are sold are now achieving a selling price that exceeds the property’s Home Report valuation. This marks a significant change from the situation three or four years ago when buyers are securing around two-thirds of homes for less than the Home Report valuation figure.
In most cases, the premium being paid by buyers is less than 5% of the valuation, but we are starting to see a rise in the number of cases where buyers are bidding well over the valuation to secure their home. Over the last three months, one in ten homes changing hands achieved a selling price that was 10% or more above the property’s Home Report valuation.
Prices Inching Upwards
As has been the case throughout much of 2015, house prices are continuing to head north, but at this stage the rate of growth remains relatively modest. Across Edinburgh as a whole the average property price during the third quarter of the year rose by 2.5% annually, from £220,448 in 2014 to £226,013 this year.
It is worth noting, though, that there are sections of the market where prices are rising more quickly. For example, the average price of a three-bedroom flat in the Capital rose by 6.6% on an annual basis from £257,325 to £274,349.
Often, people buying these properties are ‘second-steppers’ looking to move up the property ladder. Over the last few years, many people in this situation had delayed making a more until market conditions improved. As the economic picture has brightened, demand from those looking to move up the ladder has picked up substantially resulting in the faster rise in prices here.
Interest Rates Remain Unmoved
Earlier this month, the Bank of England’s Monetary Policy Committee (MPC) voted eight to one in favour of keeping the Bank Rate at 0.5%. The rate has now stood at this historically low level for over six years as the Bank has tried to encourage consumer spending to stimulate economic activity.
Interestingly, the sentiment on when interest rates are likely to rise has changed somewhat in recent weeks. It had been widely expected that rates would rise early in 2016, with Mark Carney, the governor of the Bank of England having strongly hinted that this would be the case over the summer.
While many are still expecting a rise during the first half of 2016, there has been an increasing number of voices suggesting that any increase in rates may yet be some way off. Andy Haldane, chief economist at the Bank of England said in September that the case for raising interest rates is “some way from being made”, while Capital Economics said that it was “easy to imagine rates not rising until the second half of next year”.
If and when rates do rise, any increase will be slight which will make it easier for homeowners who are on variable rate mortgages to adjust to an increase in their repayments. Low interest rates are obviously not such welcome news for savers who are looking to build up enough money for a deposit, but with mortgage availability improving there is still good news out there for those looking to get onto the property ladder.
Looking Ahead to the Final Quarter
The final three months of 2015 should see a continuation of recent trends. The number of homes changing hands will remain higher than in recent years and sellers will continue to enjoy success in negotiations with buyers.
There was a slight dip in the number of homes coming onto the market over the summer months, but as potential sellers continue to see For Sale Boards going up and coming down again in short order, the number of homes for sale should start to pick again which will help to keep house price inflation under control as we head into the new year.
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