‘REALITY CHECK’ FOR HOUSE PRICES – BUT BUBBLE FEAR IN EDINBURGH

Demand for flats is high across Scotland

There’s been a gradual but steady change in the Scottish property market. In the past few years, a growing number of homes have been offered at a fixed price, rather than the ‘offers over’ pattern which prevailed in the decades before. Now, there’s growing evidence that a more deep-seated change has taken place with a report claiming that the gap between what people hope to sell their houses for and the price they actually achieve has narrowed.

Demand in Edinburgh outstrips supply
Demand in Edinburgh outstrips supply
The survey was carried out by the property website, S1homes. It looked at the average asking prices with those officially registered at settlement. On average, properties sold for about £4,000 less than their asking price. However, the average selling price did rise by more than £8,500 to £161,748 in the third quarter. In other words, it found that the “reality gap” had narrowed from 9% to 2% in that period, driven mainly by what buyers were prepared to pay rather than a drop in prices.

However, there were significant variations between the top and bottom of the market. Flats for instance continue to perform well across Scotland. Many of them sold on average for more than 17% (or £19,000) above their advertised price. By contrast, many detached properties failed to meet their asking price.

According to S1homes commercial director, Ewan Stark, “this quarter’s report shows that there have been significant changes taking place in the property market. Buyers are now prepared to pay more than they have been for quite some time and that, coupled with a slight decline in average asking prices, is what has led to the upsurge in the volume of properties being sold.”

Robert Carroll of Mov8
Robert Carroll of Mov8
However, estate agents in Edinburgh are warning that there could potentially be a mini property bubble in the capital. House prices and indeed sales volumes have been rising, but supply has not kept pace and the shortage could push prices higher. Over the past year, sales volumes have risen so dramatically that some Edinburgh property is now being worth more than it was before the 2008 crash. With demand remaining high, a lack of supply could push prices even higher.

Robert Carroll, managing director of MOV8 Real Estate in Edinburgh, explained that traditionally, the winter months were always perceived as a bad time to sell, “but that’s simply not true now. More and more buyers are going online from the comfort of their own homes during dark evenings to search for properties to buy. With sellers holding off putting their properties on the market until next Spring, that could prove a problem when buyers are continuing to look.

“The properties that are on the market at this time of year are selling far quicker. Proportionately, far more properties sell at this time of year than at any other.” He advises buyers who were looking for a new home in October and hoping to be in before Christmas, not to stop looking just because it’s a new calendar month.

As well as the latest figures from Registers of Scotland, the local property marketing agency, ESPC, is also reporting that agents across Edinburgh are experiencing the same thing. Its spokesman, David Marshall, pointed out that 2013 saw a substantial rise in market activity “but at this stage, the rate at which buyer activity is rising has outstripped the rate at which sales activity has grown.”

In the third quarter of the year, the number of homes sold in Edinburgh rose by more than 40%. By contrast, the number coming onto the market had only increased by 15%. As Mr Marshall explained, “overall there’s no question that the market conditions are more favourable for sellers than has been the case for a number of years. Those who are realistic in the pricing of the property are enjoying notably greater success in finding buyers.”

Carol agrees, adding that his firm had beaten all previous company records for sales this quarter alone, but added that “we’re starting to reach critical levels. Very soon will run out of properties to sell!”