MORTGAGE MATTERS
If you have a mortgage, you will know only too well that interest rates have been steadily rising. As I write, the Bank of England has raised its base rate from 4.5% to 5% – the highest since 2008.
Depending on your circumstances, the impact on your personal cost of living expenses will vary. Unfortunately, as some lenders are now setting their 2-year fixed rate residential mortgage deals at an average of over 6% and a 5-year fixed rate mortgage at an average of 5.82%, tens of thousands of property owners in Scotland do face a tricky balancing act with household finances in the months ahead.
I’m always wary of putting too much weight on statistics, but I do believe it’s important to consider the current trends in the Scottish property market to understand how buyers and sellers may be reacting to continual mortgage rate increases and as part of the ongoing cost of living crisis.
INSIGHT TO SCOTLAND’S HOUSE PRICES
The latest UK House Price Index Scotland: April 2023 (published 21 June 2023) reports that in the 12 months to April this year, average house prices in Scotland increased by 2% to £187,150. However, the volume of transactions (compared to February 2022) is down over 16% in Scotland. Therefore, even this quick snapshot of the property market highlights that it’s a mixed, constantly changing landscape.
From a macro-economic perspective, I do wonder if older property owners in large semi-detached properties and seeking greater liquidity to enjoy in retirement will increasingly be motivated to sell and downsize. After all, further analysis reveals that Scotland-wide, the average 12-month (April 2022-April 2023) price change was greatest for semi-detached homes (up 3.3% to £200,959) and detached homes (up 2.1% to £337,568). By comparison, over the same period, flats were up 1.6% to £127,846.
Based on the same statistical source, property owners looking to sell in East Lothian may be buoyed by the impressive 17.2% annual price in their local authority area over the April 2022-April 2023 period and where the average property price is £333,715. City of Edinburgh continues to be strong with a 3.7% increase to £330,481.
It’s notable that the likes of West Lothian (up 6.3% to £204,790), Stirling (up 3.5%), Argyll & Bute (increase of 7.3% to £187,470), Perth & Kinross (3.6% to £236,642) and Renfrewshire (4.8% to £150,237) are also seeing increases in house values. This may reflect an appetite for buyers continuing to seek more space and value in rural and semi-rural areas that can still be commutable to major towns and cities.
LOCATION AND AFFORDABILITY
The above is potentially great news if you are planning to sell your home in the likes of East Lothian, Edinburgh and Argyll & Bute and even wish to downsize. However, from a buyer’s perspective, as borrowers face increasing mortgage outlays, will those who seek more space and ‘bang for their buck’ be drawn towards properties in other areas of Scotland that offer a means to balance climbing the property ladder with affordability?
A glance at the latest UK House Price Index Scotland: April 2023 (published 21 June 2023) underlines that while the local authority area of Inverclyde (that includes the towns of Gourock and Greenock) continues to be the most affordable area to get a foot on the housing ladder, it’s also the local authority where there has been a huge increase in annual average property price (12% to £119,112).
Easily commutable to Glasgow and with towns and villages either overlooking the Firth of Clyde or a stepping-stone from the west coast, it may be that Inverclyde is increasingly attracting home buyers who seek affordable living with a wide range of amenities.
Equally, if you are willing to buy into a market where property prices are lower due to a number of external factors, arguably including changes in the employment market, it’s notable that City of Aberdeen (down 7% to £133,954) and even Falkirk (down 2.3% to £158,131) may offer value if you don’t plan to move again in the short term.
Home Report
It’s again important to reiterate that the above statistics should only be treated as a guide. Ultimately, every seller and buyer of a property will have their own priorities and ‘wish list’ including the type of property and location.
However, in my opinion, it appears that whatever the type of property you own or wish to purchase, for many people in Scotland the ongoing upward shift in mortgage rates will ensure there’s the need to balance location and desired type of property with the key issue of affordability.
Furthermore, regardless of the type of property you are selling, over 25 years of experience in the property industry and as a RICS accredited chartered surveyor has underlined my firm belief that a professionally prepared and thorough home report from the likes of the Home Report Company will serve you well as part of the process of putting your home up for sale.
