A surprise Brexit vote, surprise US president and a threatened second Scottish Referendum to name but three of the biggest topics. How do these and other factors affect our predictions for the housing market in East Central Scotland for 2017?
House prices rose in 2016, driven largely by the shortage of good quality properties on the market. The ESPC shows a reduction of 8.3% in the number of properties coming to the market in 2016 compared to 2015. In 2007, before the global financial crash there were 46% more properties for sale through the ESPC. A very big difference, less choice for buyers and more competition when a buyer does source a property that they are interested in. Also fuelling price increases.
Other Market Factors
Starting in April 2017, landlords will experience a reduction in the tax allowance available to them for setting-off mortgage payments against rental income. This allowance is being reduced over the next few years. Landlords who have a mortgage on their rental property will pay more income tax on the rental income. Landlords, particularly those with large mortgages, will see a significant reduction in rental yields after they have paid tax. Landlords in this situation may sell. This change in the tax laws kicks-in from April 2017. Landlords won’t actually experience the effect of this until the tax falls due for payment. It’s therefore possible that the effect of this change will be felt more keenly in 2018.
But the property letting culture is pretty deeply ingrained and – with over 55 year olds now being able to access 25% of invested pension funds and switching to investment rental property, lenders offering low interest rates, and with rental yields of 5 or 6% - the letting proposition remains an attractive one.
The Scottish rates of stamp duty (LBTT), which escalate sharply further up the ladder to as much as a top slice charge of 12%, continue to have a dragging effect on the upper end of the market. Will the Scottish Government consider a review of these higher rates in 2017? The UK wide 3% additional dwelling second home stamp duty supplement will continue to deter some investment purchasers, although the Revenue Scotland receipts on this score have exceeded estimates, and the middle market has not been as affected by this consideration as might have been expected.
With less properties coming to the market, competition between property buyers for available stock has increased. The average selling time in East Central Scotland between September and November in 2016 was reported to be down by 11 days, to 25 days, when compared with the same period in 2015.
We predict that we will see a continuation of this pattern in 2017, with demand outstripping supply and speedy sales times remaining as compared with recent years.
Mortgages and Interest Rates
2016 saw a further reduction in the Bank of England’s already historically low base lending rate, from 0.5% to 0.25%. Interest rates look certain to stay at their present level until growth in the economy materialises and of course that growth is hard to predict in the new Brexit landscape. The availability of competitive mortgage finance remains steady, in line with demand for those fortunate (and patient) enough to meet lenders’ criteria. As ever good professional mortgage advice is an essential component of the process. Buy-to-let mortgages are set to become that bit tougher to secure, and first time buyers will continue to be challenged in raising requisite deposit finance.
Despite the ongoing political and financial changes of the UK and the world at large we consider the property market in East Central Scotland to be sufficiently robust to ride the bumps ahead, if not take advantage of the opportunities that are equally likely to arise from new circumstances, in the much the same way as 2016. Sellers ready and able to take the plunge should have confidence in a keen market for good quality properties. Firm if not increasing prices and reducing sales times are likely to continue to be a notable feature with buyer demand remaining high.
If you would like advice on a marketing strategy including a FREE market valuation, just call on 0131 337 1800 and ask for Robin Davie, Property Director, or email email@example.com
BC blog editor
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