ESPC annual review 2016
2016 was a year marked by change, and while there were concerns that Brexit would have a negative impact on housing, there was little evidence that it made a difference to the typically robust east central Scotland market.
The property market in 2016 proved to be in favour of the seller, as a shortage of stock resulted in homes selling much faster than in previous years, and with an increase in properties achieving on or above their Home Report valuation.
There were also government changes to Land and Building Transaction Tax (LBTT) in 2015 and 2016, which had an initial effect on the housing market, including a slower growth in average selling price and an increase in the number of one and two bedroom flats being sold.
The average selling price in east central Scotland increased by 2% in 2016, compared with 5.6% in 2015. This moderate growth is partly explained by average selling prices in 2015 being driven up by higher end properties being sold before the implementation of the tax changes with LBTT. When comparing like-for-like properties (rather than overall averages), there has been a 5.2% increase in average selling prices for one bedroom flats, a 2.5% increase for two bedroom flats, and a 4.5% increase for three bedroom houses.
In the first three months of 2016, the average selling price of one bedroom flats in the Leith Walk area increased by 16.3%, while it was one and two bedroom flats were the top sellers in east central Scotland in the first half of the year. This can be attributed to the LBTT Additional Dwelling Supplement which was implemented on 1st April 2016, as people wishing to purchase a buy-to-let property did so before this date, so they wouldn’t have to pay extra tax.
The number of homes sold in east central Scotland in 2016 decreased by 6.7% annually, which is the first decrease in volumes since the initial bumpy recovery from the global financial crisis of 2007-2008. In 2015 the number of homes sold rose by 9.8%, so this decrease could be a result of less housing stock available and the effect of changes to LBTT. However, the demand for properties by buyers is evident through the continued rise in selling prices and quicker times to sell.
2016 was a positive year for those selling their properties, as the market was in favour of the seller, providing more certainty on meeting the Home Report valuation. The median selling time in east central Scotland in 2016 was 39.6% faster than 2015 – from 41 days down to 25 days. 65.6% of sales in 2016 met or exceeded their Home Report valuation, up 14.7% from the previous year.
79.2% of properties for sale were marketed as ‘offers over’, compared with 69.2% in 2015, demonstrating that sellers and their solicitors had increased confidence that properties could meet their Home Report valuation, with an average of 7.2% over the asking price, up from 5.4% last year.
Overall, three bedroom houses in Currie, Balerno and Juniper Green saw the largest year-on-year increases in average selling prices, up 15.2% from 2015 – despite the number of sales staying about the same.
Paul Hilton, CEO of ESPC, said: “When overviewing 2016, the standout is that it was a seller’s market, with less properties on the market, rising selling prices, faster selling times and more properties for sale meeting or exceeding their home report valuation.
“While we are seeing a decrease in properties sold for the first since the recovery from the 2008 crash, this is mostly a result of the tightening of stock on the market, which some have attributed to the introduction of higher LBTT tax rates for upper middle properties. This has dampened the traditional property ladder patterns of buying up and replenishing active stock on the market.
“2017 could be a good time to sell property as it could be snapped up quickly and with greater competition at closing dates. With favourable mortgage rates and many lenders offering 5% mortgages, 2017 could be a good year for buying a new property.
“Possible impacts on the property market include the housing shortage, which could continue to impact on prices and active stock. There is also the potential impact of the triggering of Article 50. We will have to wait and see what the year has instore.”