The Big Picture
Over the past 12 months, macroeconomic and political events, including soaring inflation, rising energy costs, higher borrowing rates and a cost of living crisis have all impacted Scotland’s residential housing market. Few have foreseen the turmoil of recent months and in my opinion, it’s a brave person who makes steadfast predictions for the year ahead!
However, as independent experts in our sector, the Home Report Company believes the challenges of 2023 still offer great opportunities for buyers and sellers alike. My many years of advising clients have underlined one constant truism – sellers will always wish to aim high and buyers will wish to aim low.
Before we consider my Scottish Property Predictions in 2023, here are a few key statistics from 2022.
Data from the UK House Price Index reveals that the average price of a property in Scotland in November 2022 was £191,492, an increase of 5.5 per cent on November 2021. Notably, compared to the previous month, house prices in Scotland also decreased by 1.2% between October 2022 and November 2022.
Furthermore, according to the Registers of Scotland UK House Price Index figures for November 2022 (published 18 January 2023), in Scotland it was homeowners with detached properties who benefited from the largest increase in their property value, ‘rising by 7.9 percent in the year to November 2022 to £349,342.’ Conversely, the same report noted that ‘flatted properties showed the smallest increase, rising by 1.8 percent in the year to November 2022 to £128,696.’
However, if all this sounds very rosy, let’s also be mindful that in its bid to tackle rising inflation, by the end of 2022 the Bank of England had increased its base rate to 3.5% – its highest in 14 years. Tellingly, at the start of January 2023, the average 2-year fixed-term mortgage was over 5.5%, compared to less than 2.4% a year earlier.
Navigating the new normal
So after the rapid growth of the market in 2021 and 2022 we are very likely to see a ‘downward correction’ in 2023. Some commentators predict around a 5% drop in house prices – or even by as much as 8%. However, these figures must be taken in context – remembering that in the immediate post-pandemic period there was a marked increase in house prices. So perhaps the take-away message here is that in the months ahead we are simply going to see a more ‘normal’ pricing of our precious bricks and mortar.
Certainly, homebuyers may find a steadying of the sales price makes it slightly easier to purchase a flat or house – albeit the volatility of mortgage rates may still impede first-time buyers and those coming to the end of their fixed rate terms.
Fuelled by the post-pandemic societal shift towards more home-based, flexible office working, I predict we will continue to see marked demand for larger out-of-town family properties – with some rural and coastal properties able to command a stronger selling price. Indeed, it’s notable that the Registers for Scotland House Price Index (November 2022) highlighted that the largest average house price increase last year was in the local authority area of Midlothian, where the average price increased by 13.2 percent to £245,50. In fact, the report stated that 31 of 32 Scottish local authority areas saw an average increase in house prices. The only exception was the City of Aberdeen, where the average price decreased by 4.7 percent to £140,392.
In addition, with energy prices rising, it makes sense for home sellers to carefully consider the energy efficiency of their homes. Based on the findings of the Energy Performance Certificate (EPC) you may wish to invest in energy-saving measures to maximise the appeal of your home to a potential buyer. I’ll cover this subject in more detail in a separate blog.
FIRST TIME BUYERS
The cost of living, cost of borrowing and soaring energy prices make tricky conditions for the first time buyer. However, the silver lining is that as the market corrects itself, there should be more ‘affordability’ of homes in some areas. Indeed, it was noted in the Bank of Scotland report that Inverurie and Ayr offered more modest price rises last year. As I stated earlier, the trend for more flexible ‘hybrid’ home working may also mean that some families may be keen to move into larger houses further from city centre areas – potentially opening the door for first-time buyers who seek their first one or two-bedroom flat.
However, keep in mind the fact that according to the Registers of Scotland House Price Index (Nov 2022) Edinburgh remains the highest-priced area to purchase a property, with an average price of £334,113. Inverclyde is reportedly the lowest-priced area to purchase a property with an average price of £127,384. As I noted earlier, the average price in Scotland for a flat or maisonette in 2022 has only marginally risen (up 1.8% in the year) to around £128,000.
SCOTTISH HOUSING PRICES
Hopefully, all of the above information gives you, whether a potential buyer or a property seller a barometer to inform your decision-making. Of course, all statistics should be considered simply as a guide – market demand in a particular geographical area or for a type of property may change throughout the year. For this reason, a professional, thorough Home Report conducted by the likes of Home Report Company can be invaluable to help you determine the value of your property and to identify where improvements in the likes of energy efficiency can be made prior to putting your property on the market.
However, while figures will fluctuate there’s no doubt that generally, buyer demand continues across all property types, including detached, semi-detached, terraced, or flat. So I anticipate that though 2023 will present us all with challenges, there will definitely be opportunities in all key markets, including in Edinburgh, Glasgow, Stirling, Aberdeen, Ayr and Fife for the home seller or buyer keen to make a move this year.
