MOV8’s Managing Director, Robert Carroll, looks at what’s in store for the Scottish property market in 2025.
Mortgage Rates
If things go to plan, the Governor of the Bank of England has predicted that we might see four further cuts in 2025. At 0.25% per cut, that would be a 1% reduction to 3.75%.
This time last year, the average 2 year fixed mortgage product was around 6% APR. We are now seeing products around 4% which massively helps with affordability for the vast majority of property buyers who are buying with a mortgage.
Property Prices
If you were a seller, 2024 was a good year. Across East Central Scotland, ESPC reported a 5.3% year-on-year increase in property prices and they expect to see a similar pattern in 2025. I would completely agree with that prediction and expect to see steady property price growth in the coming year.
Sellers Coming to the Market
New properties coming to the market across East Central Scotland were up 12% in 2024 compared to the previous year. I would expect that the level of available stock on the market will remain steady in 2025, but I do not expect a huge surge of properties coming to the market in comparison to 2024.
Buyer Demand
Along with more properties coming to the market in 2024, sales also increased by a similar proportion. I expect buyer demand to be strong in 2025.
Affordability in terms of monthly mortgage payments is likely to improve in 2025 compared to 2024. The “premium” that buyers are having to pay over the Home Report valuation has remained consistent at an average of 2% of the Home Report valuation. It is also becoming increasingly difficult to find a property to rent and increasingly expensive to rent. With mortgage affordability improving and lower premiums over Home Report valuation, this is likely to drive more people from the rented sector into home ownership.
Purchases “Subject to Sale” and an Increase in “Chains”
With fewer properties coming to the market in the last couple of years than we have seen historically, far more home movers want to be sure that they have a house to move into before they commit to selling their existing home. This has led to a significantly increasing number of buyers offering to purchase a property “subject to sale” of their own property.
As a result, there has been a significant increase in delicate “chains” where one deal being delayed or collapsing can put the rest of the sales and purchases in that chain in jeopardy. Whilst we can qualify our own client’s buyer’s position, we have no control or knowledge of the position with the other sales in the “chain”.
I would expect this to remain similar in 2025 whilst the median time to agree a sale remains stable.
ADS and the Rental Market
In December we saw an overnight increase of the Additional Dwelling Supplement (ADS) from 6% to 8%. A private individual in Scotland who wants to buy a property with a view to renting it out will now pay £16,000 in ADS on a £200,000 property. It is also expected that the Scottish Government will introduce rent controls in spring/summer 2025.
This will undoubtedly reduce the number of people who want to buy a property to rent-it out. Less properties for rent pushes rents upwards. The only positive for first-time buyers is that this would mean that more properties will come to the market of the type that they are currently renting.
Land and Buildings Transaction Tax (LBTT)
LBTT is up for review by Scottish Government in 2025. Based on recent years, it is unlikely that they are going to make it cheaper or look to generate less tax revenue! The last time we saw that happen, it caused a rush of buyers trying to wrap-up the purchase before the tax increased. I can only hope that the Government doesn’t make significant changes that might negatively affect the property market in Scotland.
New Build Sector
The new build market has been under pressure for the last couple of years as mortgage interest rates spiked and demand cooled. However, 2025 should see an increase in the output of new homes to the market. The builders that our New Build Legal Team works with are all expecting to see an increase in the number of active sites and available stock in 2025. The new build sector is a key driver of the rest of the property market and a healthier and more active new build market in 2025 will lead to more buyer choice and a steadier property market in the coming year.
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