- Demand for properties outstripping supply
- Interest rates and lending criteria underpinning the level of borrowing
- Time on market for properties reducing
- Increase in the number of properties now going to closing date
- Monthly rental costs also on the rise
September is traditionally a busy month for property sales and this year has been no exception. As children return to school, buyers actively return to the market in greater numbers, particularly in the family home market. We have seen a significant increase in demand for viewings in the second half of August and throughout September.
After a period of increasing stock numbers, caused by more properties coming to the market than those selling, we have seen stock numbers start to drop significantly in September due to a surge in demand. This has led to more sales overall as well as higher prices compared to Home Report valuation.
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Do the market stats back-up what we are seeing?
ESPC, the leading property marketing channel in East Central Scotland, reported that in August 2021 the average selling price of all homes in ESPC areas rose by 5.8% compared to the previous year (year-on-year). The average price now stands at £276,703, with suburban areas and larger properties having experienced the biggest rise in buyer demand. Allied to this is a drop in the number of properties coming to the market, with 5.8% less properties coming to the market. As always, when decreased supply of new properties to the market combines with increased demand, prices shoot up.
This imbalance between supply and demand has caused 36.7% of properties going to a Closing Date, up from 26.6% in 2020. Whilst this can be particularly frustrating for property buyers, Closing Dates tend to prompt increased competition between potential buyers which leads to properties selling for a higher percentage of the (usually) more conservative chartered surveyor’s Home Report valuation.
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Registers of Scotland, which registers the transfer of all residential properties in Scotland, reported a 2% month-on-month increase in property sales registered in Scotland. This is allied to a 14.6% increase on the previous year’s prices. It should be noted that these figures are likely to be slightly skewed by the fact that the previous year’s period included properties that were sold during lockdown. The largest price increases were in the affluent East Renfrewshire area in Glasgow, with school catchment areas traditionally driving strong growth in this area.
The New Build Market
Interestingly, Registers of Scotland noted that new build property price growth significantly outstripped that of second-hand property sales. According to their statistics from June 2021 there was a 13% increase in new build prices compared with 6.3% for second-hand properties. A significant reduction in supply to the market of new build properties has been seen in the past year, mainly due to supply-chain and staffing issues caused by the Coronavirus pandemic, but demand has remained exceptionally high due to the appeal of buying a new home for so many buyers. This has led to many builders across the UK selling-out their existing sites and delaying breaking ground on new sites. All of this leads to higher pricing of existing stock.
The Market View
Looking at UK price trends, the UK’s leading property marketing website Rightmove reported that the national average asking price dropped by 0.3% in August 2021. This is the first price drop in 2021. It should be noted that this coincides with the end of the Stamp Duty savings that were on offer until the end of June 2021 in England and that this was always the likely outcome in the short term. It should also be noted that this is a drop in asking prices rather than selling prices, which is more indicative of a slight drop in the confidence levels of property sellers rather than actual demand from property buyers.
Rightmove reported that demand stats for the first week of August 2021 were up 56% from 2019 and down just 17% on the frenzied post-lockdown activity seen this time in 2020.
Zoopla, another leading UK-wide property marketing website, reported that the total stock of available homes for sale was down by 26% versus this time in 2020. They noted that the restrictive lending criteria prompted by the Coronavirus pandemic this time last year had negatively affected first time buyers and that this trend has now reversed, supporting more first time buyers to get onto the property ladder in 2021. They further highlighted that a significant drop in the supply of new build properties to the market has been a factor in the lack of overall availability of properties for buyers. This of course supports increased competition between buyers in other parts of the property market, particularly the second-hand market.
According to Zoopla, all these factors have combined to support significant house price growth, with the UK experiencing an annual price increase of 6%. As with any episode of Match of the Day, it’s very much a tale of two halves, with house prices growing 7.6% compared to growth of just 1.2% for flats. Scotland has seen an increase of 5.1%, out of the big cities Glasgow being the big winner (4.8%) and Aberdeen the big loser (-0.3%) in the house price inflation stakes.
The Lending Market
Finally, the biggest lenders in the UK have also released their latest stats from August 2021. Halifax, by far the biggest lender in Scotland, has announced that annual house price inflation involving properties on which they lend stands at 7.1%. They anticipate that house buyer demand will continue and that price gains since the start of the pandemic are not likely to be reversed. A strong job market and consumer confidence returning to pre-pandemic levels are likely to support prices in the near term, according to their research. Nationwide announced that property prices involving a Nationwide mortgage had increased by 11% compared to the previous year. Compared to the previous month, Nationwide reported that prices were up by 2.1%, the second-largest monthly gain in 15 years.
The effect of all of the factors outlined above on house buyers is significant. Someone buying a home in a UK city will now pay 8.1 times their average earnings, up from 5.6 times a decade ago, according to a BBC report in August 2021. It should be noted that mortgage lending is these days based more on the affordability of monthly payments rather than on a multiple of salary, the traditional measure of affordability many years ago. With interest rates at a historic low and very competitive longer-term fixed interest rates available to property buyers, affordability despite property price increases remains strong.
The Rental Market
The news is not much better for anyone wanting to rent before they buy, with rents outside London rising at their fastest rate since 2008. Rents have risen by 5% in the 12 months to the end of July 2021, according to a report by Zoopla, adding £456 to the average annual bill of a tenant. For anyone having to decide between renting or potentially over-paying to ensure that they secure a property, the choice is a difficult one. Our expert team of Purchasing and Sales Consultants will be delighted to help anybody to navigate these difficult choices.
We’re Here to Help
If you are thinking of selling your home or investment property, get in touch with us by calling 0345 646 0208 (Option 1) or by emailing [email protected] to organise a free valuation of your home or to get a full, transparent breakdown of the costs of selling your home.
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If you are looking to buy a property as a home or investment, please call 0345 646 0208 (Option 2) or email [email protected] and we will be happy to help.