With all these recent headlines regarding house price bubbles, I am sure you will be surprised to read a blog about property market stagnation, however, this is something I have a real concern about. Currently we are seeing Scottish-wide trends, with the number of sales being up between 15% – 20% but with the number of listings i.e. new properties coming onto the market at best staying the same and in some areas actually dropping – more properties are selling than coming on.
This is leading to increased price volatility as more people chase after fewer properties. This is reminiscent of the early and late ‘90s, when transaction levels in the Scottish property market dropped and it very much became a trading market, i.e. “I’m not putting my house on the market until I find one that I want to buy”. The two things that broke that cycle were the Banks increasing lending to first-time buyers and a massive increase in new-build developments. The increase of the new-build developments led to a surge of stock coming on to the market which by early 2000 got the property market back on an even keel. Whilst I am in discussions with a number of developers regarding an increase in the proposed developments that are due to begin in Scotland, it will take a while for these properties to come on to the market.
What needs to happen in the meantime:-
1. More assistance for first-time buyers to enable them to buy second-hand stock. There are lots of flats and first-time buyer suitable properties languishing on the property market at present. This would free up a whole group of purchasers which should assist with the free-flowing property market that we require.
2. The Home Report should be disbanded, or at least suspended, for six months. The Home Report is a barrier against speculative selling and we need to do everything we can to encourage more people to put their properties on the market.
3. The Banks need to be encouraged to support developers of all sizes in relation to kicking off new-build developments.
4. The Scottish Government needs to do more to assist the building of new properties.
5. Local Authorities need to be encouraged to be more relaxed and speed up the process in relation to planning matters.
I will continue to monitor the trends and will let you know how matters progress.Lindsay Darroch Partner – Head of Property