Market Commentary
By Richard Loudon, Partner
We are aware that it’s been some time since our last commentary, but as market conditions have been fluctuating constantly (and we’ve been extremely busy selling!) we have been finding it difficult to know when and what to report.
Now that the autumn rush seems to be over, we thought it an opportune time to review the year to date.
A Synopsis of the Year to Date
Strong Start
In February we reported a positive start to the year and this continued through the Spring months. Having endured a particularly long and cold winter there was a significant under supply of properties on the market (approximately 3,250 on the ESPC website) and sales achieved were suggesting a slight recovery in property prices. From previously being 20% off the peak of 2007 towards the end of 2009, prices being achieved in March 2010 seem to have improved by around 10%.
June was our most successful month of the year to date with sales of over £18.4m. By this point, live properties on the ESPC were reaching nearly 6,000; double the number at the start of the year signifying increased competition for sellers and a significant choice for buyers.
The market generally starts to gather pace towards the end of August as buyers prepare for the September market. In line with this new registrations continued to rise on the ESPC, albeit at a slower rate than earlier in the year. Unfortunately we did not experience a similar increase in active buyers.
Availability of Mortgages
Whilst interest rates have remained low, lending conditions are still tough preventing many parties from buying or moving home. First time buyers have been the hardest hit, even with the government scrapping stamp duty up to £250,000. The days of 100% and 125% mortgages seem a distant memory. A minimum deposit of 10% is now required to secure a mortgage, but at this level interest rates are high. There are some excellent fixed rate deals available but these are generally reserved for customers that have a deposit of more than 30%. If first time buyers are not entering the market it makes it difficult for everyone to continue moving up the ladder.
Home Report Valuations
Although all properties now have a Home Report valuation before going on the market, this is not a guaranteed sale price. Over the past couple of months, we have noticed that fewer properties are achieving their home report valuation, particularly if they have been on the market for some time, during which time the market has softened slightly.
Looking to the Future
If recent news articles are to be believed, we are facing another dip in the market, possibly by the end of 2010. Despite a tough recession where we saw property prices drop by 20% in Edinburgh, prices are still too high in relation to earnings. Figures reported in the Evening News earlier this year suggested that the average annual gross wage in Edinburgh is approximately £27,000. The average price of a property in Edinburgh is £229,098; 11.2% higher than at the beginning of the year and approximately 8.5 times the average annual wage.
Edinburgh is very reliant on the service industry, and in particular the banking and public sectors. With the banking crisis now (hopefully) in the past, we are nervously awaiting what affect the proposed cuts in the public sector will have on the Edinburgh economy.
Many of the major banks are now voicing their fears of a decline in the property market – some think it may be minimal, others such as Morgan Stanley suggest a fall of up to 18%.
Our Thoughts & Advice
Our opinion is that prices are unlikely to get any better and that the most likely outcome will be a modest dip in prices either by the end of 2010 or early in 2011. Good selling conditions usually last until mid/end October but this year we could see this continue to the end of the year as buyers take longer to re-enter the market following the sale of their own property.
With so many predicting another downturn our advice to those thinking of selling or currently trying to sell is to be realistic about your price. Seriously consider reducing your price if activity has been poor as you may have to reduce by a lot more in the future if you don’t achieve a sale now.
End on a High
With so much doom and gloom associated with the market at present we thought we’d end with some positives:
- We have sold more properties in each month of this year compared to the same month in 2009.
- By the 17th August 2010 we had sold a greater number of properties than we had in the whole of 2009 and our current sales in 2010 are currently over £30m more than those achieved in 2009.
Simpson & Marwick’s property team were recently named Conveyancing Team of the Year at The Law Awards of Scotland 2010. This reflects the efforts of both the Estate Agency and Conveyancing Teams during a period of particularly tough market conditions over the last couple of years. Our firm also won Litigation Firm of the Year Award.
We are continually improving our website to keep up with advances in web technology. Recent changes have included a feed of our new properties to our twitter account and a new map search feature on our homepage. If you haven't already done so, and you are currently looking for property, please follow us on Twitter at http://twitter.com/edinprimeprop.
If you would like to speak to one of our Property Consultants regarding the market and current selling conditions, please call our office on 0131 525 8600. We also offer a free, no obligation property valuation service.
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Katie Macdonald Property Consultant
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Richard Loudon Property Partner
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Louisa Preston Property Consultant
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Stephen Truscott Property Consultant
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