By John McHugh, managing partner of DM Hall Chartered Surveyors
Stress tests are a valuable tool for measuring resilience and the Scottish residential property market was put through a fairly gruelling time last year with hikes in inflation and interest rates on top of the ongoing cost of living crisis.
However, as we move into the bitter early months of 2024, it is clear that the market has not only stood up to these challenges but has exhibited a resilience which engenders reasonable confidence of a healthy rebound and a good year to come.
Certainly, transactions were down by about 11% last year, but that was most likely a direct consequence of the canniness of sellers with, not surprisingly, fewer people putting properties on the market in times of uncertainty.
Throughout, it remained the case that the right properties in the right places continued to sell well and there was never a glut of homes on the market, or many instances of uncomfortably extended marketing periods such as have been seen elsewhere in the UK.
Interest rates are no longer – nor are they likely to be in the foreseeable future – at the exceptionally low levels which have distorted expectations for so long but are edging towards an equilibrium which looks set to be maintained in the medium term at least.
We now find ourselves heading towards the territory which property professionals have long been painting as the much hoped for Goldilocks scenario – a reasonable mortgage environment, freely available lending, stable employment and an economy which, if not booming, at least is not bust.
Yes, there are geopolitical issues around the world – more every day, it sometimes seems – and we are aware that a UK General Election has to be held by the end of the year, but it is not unreasonable in the Scottish context to look forward to a period of stability.
The word from around the country is that Edinburgh continues to function as a market should: steady and active, with plenty of people looking, prices good, viewing numbers up and closing dates – the unassailable sign of underlying strength.
Glasgow is not far behind, although predominantly in the areas in which activity tends to be focused in this sprawling city – the West End, the South Side and the suburbs – although prices achieved remain very much in the wake of the levels seen in the capital.
Aberdeen has long been a market of its own in Scotland and this time is proving no different. The Granite City remains hampered by negative political attitudes towards its mainstay energy sector and the outlook is less encouraging.
In a sign of how uneasy things are there is the fact that some flats can now be bought in the region of £40,000 to £50,000 – prices which make agents shake their heads in disbelief. Some flats avoid LBTT altogether, opening up opportunities for buy-to-let investors if they can command a reasonable rent.
What is slightly surprising as we go into the year is the steadily increasing volume of cash buyers participating in the market – now reaching over 30%, according to some market watchers – suggesting that liquidity is coming in from elsewhere and is not just driven by downsizers, as was previously the case.
This money may well be coming from the rest of the UK. Despite Scotland’s disproportionate tax regime, through which middle earners pay about £2,000 a year more than their southern counterparts, there are still considerable attractions in a move north.
Scotland remains close to the bottom of all UK regions in terms of house prices and someone selling in the south-east of England will be able to take advantage of much greater affordability up here. Similar applies to sellers moving from the affluent suburbs of Glasgow and Edinburgh to smaller towns in the surrounding areas.
The rush to the countryside which occurred during the pandemic is pretty well over and employment changes, such as the return to the office, are pushing people to think more seriously about city living.
Whilst it is presently being reported that the UK economy has technically fallen into recession, with two consecutive quarters of negative growth in GDP between July and December 2023, in general, there is room for optimism. The market has been tested and has responded well. The climate is certainly better than in the last 12 months, and for that we can remain grateful.
