Will prices rise or fall? Will it become easier to buy and sell? Jeff Salway asks the experts
IT WAS a case of “as you were” in Scotland’s housing market this year, with many of the headlines supplied by the rental sector. House prices have nudged up and down, ending the year at around the same level as they started it. More homes are being sold, but the improvement has been modest and sales numbers remain well below the pre-crunch levels.
Only in the private rented market have we seen real change. July saw the launch of Scotland’s new tenancy deposit scheme, which requires landlords to hand over deposits to independent third parties. But it’s feared that the scheme, which also features a dispute mediation system, will push rents up as landlords pass on extra costs to their tenants.
A fresh crackdown on the upfront fees charged by lettings agents and landlords could have the same effect, at a time when demand for rental property is at its most buoyant in years.
That’s due partly to the difficulty in getting on the housing ladder if you don’t have a big deposit. Towards the end of 2012, however, there were signs of improvement. The Treasury’s funding for lending scheme is slowly helping push down the cost of first-time buyer loans and encouraging lenders to do more for that market.
So will this continue in 2013? Will prices rise or fall? Will it become easier to buy and sell? Read on and find out what the experts see in store for Scotland’s housing market.
Sarah Speirs, director of the Royal Institution of Chartered Surveyors RICS Scotland
Sales in the housing market in Scotland are predicted to pick up in 2013. Although challenging times are still ahead for the nation’s economy, next year may see some slight improvements and this will be reflected in the housing market.
The average house price in Scotland looks set to remain close to current levels throughout 2013, reflecting in part the uncertain outlook for the economy. More positively, the amount of sales going through should see an increase across the country, climbing to its best level since 2008, as lenders look to gradually increase the availability of mortgage finance.
But tentative signs of recovery in the sales market should not blind us to the very real problems that remain. Even with government policies beginning to be felt in the mortgage market, many first-time buyers will continue to find it difficult to secure a sufficiently large loan to take an initial step on the housing market. Meanwhile, the alternative of renting is becoming more and more costly with a further increase in rents likely in 2013.
Robert Carroll, managing director and solicitor at MOV8 Real Estate in Edinburgh
We ARE very optimistic about the housing market in Edinburgh and the Lothians in 2013.
While property prices certainly haven’t been flying upwards, they have remained stable through 2012. Most hearteningly, in the past year we have seen a huge rise in the proportion of property sales taking place at the more affordable end of the property market.
The government’s funding for lending scheme seems to now be having the desired effect at the right end of the market ie first-time buyers. Two prominent lenders have slashed their 90 per cent loan costs of late, and there are rumours that there will be more 95 per cent mortgages on offer by the end of the first quarter.
This, naturally, will assist first-time buyers, who are essentially the life blood of the market. It may also assist “mortgage prisoners” as more remortgage options become available.
Moving into 2013, unless something significant changes in general economic conditions, we expect that prices will remain stable and that the upswing we have seen in the number of properties we are selling in the second half of 2012 will continue throughout the new year.
David Marshall, business analyst at Edinburgh Solicitors’ Property Centre
It’s fair to say that 2012 was a mixed year for house sellers. On the one hand, there was an upturn in buyer activity, with the number of homes sold in Edinburgh and the Lothians at its highest level since 2008. On the other hand, average house prices were lower than they were a year ago in most areas as buyers enjoyed a large degree of success when negotiating on price with sellers. Looking ahead to 2013, we don’t expect to see a significant change in the housing market.
While the number of homes selling is likely to inch up slightly, activity will remain well below pre-credit crunch levels – meaning that the balance of power in the market will continue to favour buyers.
For sellers, the best advice is to be realistic when setting your asking price, to avoid deterring potential buyers. From the buyer’s perspective, remember that market conditions are in your favour and to take advantage of that it’s important not to become fixated on one property early in your search.
Alison Mitchell, mortgage expert at IFA Robson Macintosh
So, IS the market finally going to pick up or should homeowners/buyers be braced for more of the same? Will lenders relax their criteria to help first-time buyers more? Will Scottish house prices move?
People talk of the market improving and getting back to the way it was, but I don’t see that happening.
We need to start thinking in a new way, stop waiting for that improvement and start living again in the here and now. House prices are where they are going to be for a long time, apart from a few pockets in certain areas where you will hear the odd “wow” price.
With lenders not changing criteria anytime soon for the better and seemingly intent on tightening their rules – especially when it comes to interest-only loans – people should regularly review their mortgage, not just for the rates but also to ensure that the mortgage is still suitable for them.
A lot has been said about the funding for lending scheme, which is gradually trickling through to first-time buyers. I feel that more and more lenders will utilise these funds and we will see an increase in the first-time buyer market over the next 12 months. This won’t necessarily increase house prices, but movement and activity will improve.
David Alexander, owner of DJ Alexander letting and estate agency
For both sectors of the housing market – owner-occupation and rental – 2013 is almost certainly to be “business as usual”. I foresee little or no movement in house prices, with offers staying at no more (and often less) than the official asking price.
What almost everyone presumed would be a temporary phenomenon in the wake of the banking crisis has actually become the norm and almost certainly the paradox of low interest rates and a mortgage famine will continue for the next five years at least.
Either by accident or design, there is certainly a movement away from buying and towards renting. Many young singles and couples are now into their second or third leases and families are also renting in growing numbers.
Because rises in property values are marginal, and in most cases static or even negative, tenants are no longer incentivised to get out of renting and into owner-occupation at the earliest opportunity.
However, I do hope that this will not lead to any appreciable rise in rents because people need to have a roof over their heads and if they cannot get a mortgage, where else are they to go? Let’s hope the rental market does not experience a “bubble” similar to the one that afflicted home ownership before 2007 and then take a decade to recover.
Dr John Boyle, head of research at Rettie & Co
Our forecast sees Scottish house prices edge up 1.5 per cent next year, picking up more from around 2015, when we expect them to rise by more than 5 per cent.
Our sales forecast also sees little change over the next year. The number of transactions for prime properties, in both Edinburgh and Glasgow, has increased in the last year, but remains well down on normal market levels. The middle to upper parts of the market continue to outperform the lower rungs as there are greater levels of cash and equity here for house purchasing. We also expect this segment of the market to pick-up quicker on the upturn.
Rental demand continues to grow, as do rent levels, especially in cities with strong demand pressures and limited new supply, eg Aberdeen and Edinburgh. We are seeing a clear shift from owner-occupation to rent. It is still relatively modest, but it is discernible and will get larger as many people increasingly see renting as their only viable option over the short to medium term.
Limited bank lending continues to affect first-time buyers, investors and housebuilders, despite improving mortgage affordability for households and new initiatives such as MI New Home. This looks unlikely to change over the next few years at least.