Before I give you my predictions for 2014, I would like to review 2013.
At the beginning of 2013 I predicted a property market with steadily increasing activity and with prices remaining stable. I believe, despite headlines from some organisations, that this correctly reflects what is happening in the vast majority of Scotland. We saw an increase in activity in the second half of the year spurred on by increasing confidence, improved economic data and Government incentives to assist first-time buyers. This increased confidence had led to Banks making mortgage funds available for both residential properties and commercial developments and the number of residential transactions in Scotland very much mirrors the increase in the number of loans for house purchases.
So what does 2014 have in store? Although I do think there will be increased improvement in 2014, I am signalling a slight note of caution in relation to market activity and prices. For the residential market in Scotland to return to normal, it is crucial that new properties go into the market in the first three months. However, sentiment, economic conditions and even poor weather could have an impact on the number of properties coming in to the market. My feeling is that things will continue to improve and with a fair wind behind us, 2014 will be the start of an upturn in the property market.
I am predicting a 10% increase in activity levels compared to 2013 with a small increase in the house average price. I am sure that readers of previous blogs need no reminding of my feelings about house price surveys and if you are considering selling your property it is very important that you get a specialist Solicitor Estate Agent to give you a market appraisal and a correct indication of likely price.
Although transaction levels showed a slight improvement in 2013, they were still more than half the levels of 2007, and therefore I think the 10% increase in transaction levels is not unrealistic and will simply set us on a four to five year course where we see activity levels increase steadily although not reaching the heady days of 2007.
I am in discussions with a number of developers both UK wide, Scotland wide and local to the Dundee and Angus markets and they are all indicating an increase in activity levels. Those fortunate enough to have land banks are now actively starting up and marketing sites. With increased stability in the economy and the property market I am expecting to see an increase in appetite for Banks to lend for residential developments – lending started to increase in 2013 and is continuing to move in the right direction adding further stimulus to the economy. There is still an oversupply of first-time buyer type properties throughout Scotland and I would hope that Government incentives for the property market, particularly those focused on first-time buyers, will continue until we are certain that this market is back at normal levels. The stats continue to show an increase in the number of first time buyers and I am sure this will be the topic of future blogs.
So what if the number of properties coming on to the market does not increase as dramatically as I predict/hope in 2014? I do worry that if there is a lack of properties coming on to the market this will lead to stagnation as previously seen in the mid to late 90s. This stagnation is caused by people not putting their property on the market because they don’t see anything they want to buy. This sentiment was changed in the 90s by developers increasing the number of new-build properties available and although developers are now cranking up their activity it will take a couple of years for this to fully filter through into the market. This is another reason why the Government needs to keep supporting the property market so that the recovery gains proper traction.
In September 2014 a Referendum will take place to decide the future of Scotland but I have not seen any evidence and I am not anticipating this to have any impact on the Scottish property market although I would say, on a commercial property front, I have noticed a degree of uncertainty among investors and business people. Although I predict the property market throughout Scotland will continue to improve there are still the geographical differences, first east/west with the west lagging behind the east caused by a variety of factors, the main one being an oversupply of properties on the market. Aberdeen continues to be a very hot property market both in terms of volume and prices.
Longer term I would draw your attention specifically to changes to Stamp Duty which will have an impact on properties valued at more than £180,000. I am sure that there will be more blogs on this as the change date approaches and I do have a concern that this will have a negative impact on the market.
Property investors continue to return to the market and I do think that the very positive rental yields of 2008 to 2012 will slowly turn to more normal levels as house prices increase and tenant demand decreases.
In conclusion I do think that the first three months of 2014 will be critical to how the Scottish property market fares for the rest of the year although I am confidently predicting a 10% increase in transactional levels driven by the factors as detailed above.
I am looking forward to a very exciting year with lots of opportunities, an increase in activity in the housing market and improving economic conditions.
I take this opportunity to wish all readers of this blog a happy and prosperous 2014.Lindsay Darroch Partner & Head of Property