September Property Market Update 2023

Property Market Highlights

  • Average Scottish house prices dip for the first time in three years
  • ESPC’s CEO says current market bears little resemblance to 2009
  • Buyer demand remains positive with strong sales activity and relatively quick selling times for properties in Scotland

Average House Prices in Scotland Fall for First Time in Three Years

It’s hard to believe that it is almost a year since the UK Government’s ill-fated “Mini Budget” that caused huge ripples in the mortgage market and a significant spike in the cost of borrowing for most house buyers. Since then, we have seen Bank of England “base rate” hikes on an almost monthly basis and mortgage product rates remaining stubbornly high. After 12 years of almost continuous house price growth, bizarrely accelerated by the Covid pandemic, are we now experiencing the correction that so many people have been waiting for?

The Insider reported late last month that Scottish house prices have dipped taken a dive for the first time in three years.

According to the recent Residential Market Survey conducted by the Royal Institution of Chartered Surveyors (RICS), a net balance of -9% of respondents revealed that property prices fell significantly over the last three months – the first time Scotland’s price balance has been in the negative since June 2020, when Government-enforced restrictions fettered the market due to the COVID-19 pandemic.

The Guardian reported that UK house prices fell at the fastest rate since 2009 in August 2023.

According to Nationwide Building Society, property prices dropped by 5.3% last month compared to the same period in 2022 – the biggest annual decline in 14 years. According to the lender, average UK house prices are roughly £14,500 lower than in 2022, while mortgage approval rates have likewise declined by a fifth compared to the pre-pandemic period.

It’s of course important to view these statistics in context. Scottish house prices hit a record high in 2022, surpassing the £200,000 mark for the first time in August last year. After a couple of years of artificial economic stimulus due to Covid, a cooling of the market was almost inevitable.

It’s important to bear in mind that, due to a combination of abnormally low interest rates and very high demand versus supply of properties to the market, properties have for years now been selling for several percentage points above what Chartered Surveyors believe that the properties are actually worth, in other words the Home Report valuation. In many cases, a drop of 5% in the selling price versus this time last year will still mean that the property is selling for its true value.

We often advise our clients on looking at the “cost to change” versus the absolute cost of property. In other words, if you are selling and buying in the same market conditions, whatever you are buying will be similarly affected as the property that you are selling.

ESPC’s CEO Says Current Market Bears Little Resemblance to 2009

Any drop in house prices will of course turn people’s minds towards the last time there was any sort of significant negative movement in Scottish house prices, the 2009 property market crash. So, is the relatively gentle dip experienced in the past few months similar to a crash that took place against a backdrop of global, economic meltdown and the collapse of the banking sector?

ESPC’s CEO, Paul Hilton, argues there is plenty to be optimistic about and suggests that any such comparisons are unfounded.

Data compiled by ESPC this month shows many significant differences between 2009 and 2023. The average property price in Scotland in 2009 was £195,455, while the average selling price in 2023 currently sits at £278,008 (at the time of writing). Moreover, when we look at how long homes sat on the market, we see that it took an average of 85 days to close a sale in 2009 compared to just 22 days in 2023.

But ESPC argues that the most significant difference is seen when we compare the number of properties available for a fixed price in 2009 with today, which, Hilton asserts, is a method that many sellers opt for when seeking a quick sale – something we would reasonably see more of if people are looking to avoid soaring mortgage repayments. So far in 2023, just 970 properties have been listed as ‘fixed price’, while in 2009, a far more significant 3,631 homes were put on the market using this method.

Concluding that there is little similarity between market conditions in 2009 and 2023, Hilton states:

“While inflation and mortgage rates have been at the forefront of discussions around the housing market for almost a year now, there are arguments that inflation has now peaked. This may well mean that the worst is now behind us, and things will gradually begin to improve – welcome news for first-time buyers, homeowners, and investors alike… While things have been harder for many, and while the frenzy of the immediate post-pandemic years has calmed substantially, the Scottish housing market is still performing well, and buying property, whilst not necessarily an easy thing for many, remains an aspiration that can be achieved.”

You can view ESPC’s full findings here


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