By Struan Douglas
Last week we reported the first signs of a slowdown in the Edinburgh property market after the post-lockdown boom. But let’s keep things in proportion.
A new survey has confirmed the Capital as the UK’s second most valuable property market outside of London, with a combined housing stock worth £70.594bn.
The survey was based on an analysis of residential stock from Gov.uk and the current average house price by local authority to see which areas are the most valuable.
Kensington and Chelsea ranks as the UK’s most expensive place to buy a home but the most valuable area is the City of Westminster with 125,312 residential properties worth an average of £963,725, bringing the combined market value to an eye-watering £120.766billion.
Who’d have guessed that a global pandemic would have led to the kind of booming sales we’ve seen in the past three months?
Contrary to expectation, people emerged from lockdown desperate to re-join the land of the living and, for many, that meant splashing out on a new home.
As we reported last week, there is some evidence of a cooling of activity, with some properties taking longer to sell and some of the high premiums enjoyed by sellers since the start of August beginning to tail away.
A tightening in lending practices by some banks and building societies, the collapse of the short-term letting market and the end of the First Home Fund for 2020 are among the factors driving the contraction.
But is this simply the market righting itself or the start of a downward trend? What can we expect going into the new year, particularly now that a vaccine has been developed with the first tranche of Britons expected to be vaccinated as early as next week?
According to the Royal Institute of Chartered Surveyors (RICS) the picture continues to look rosy. The RICS is usually regarded as a reliable indicator of trends because it’s based on the observations and expectations of property sellers – the people at the chalkface.
A survey by the organisation found that 68% of contributors reckoned that house prices across the UK rose in October – the highest proportion since September 1999.
However, similar to our findings, it is less positive when casting forward, reporting that “respondents appear doubtful that this rate of house price inflation can be sustained… at the 12-month time horizon, respondents expect a much flatter trend in house prices to emerge.”
Just as we have been taken by surprise by a booming market in the middle of a pandemic, it does appear somewhat counterintuitive to suppose that the market will start to dip the moment a vaccine is discovered.
But some analysts believe that is exactly what may happen for the simple reason that, as life starts to return to normal, people will have lots of other things they want to spend their money on, like holidays, meals out and new cars.
While unemployment may have some impact on the market, they say, the people currently buying homes are, on average, going to be those who feel relatively secure in their jobs.
An unknown variable in the calculus – and one which could keep the market buoyant throughout 2021 – is the current super-low interest rates.
While mortgage lending has tightened recently, particularly for for first-time buyers due to banks’ fears of bad debt, if the economy starts to recover, the credit purse strings may well be loosened by the Spring.
Another trend worth watching, after the virus has dissipated, is whether the urban exodus caused by the pandemic will continue.
It is still uncertain if home working will be as big a part of the ‘new normal’ as we expect, or if the flight of homebuyers from the cities starts to reverse as people regret uprooting themselves and moving to the countryside?
For more information about property values in your area, call Purdie & Co on 0131 346 7240 or visit www.purdiesolicitors.co.uk
Struan Douglas is the Managing Director of Purdie & Co Solicitors and Estate Agents