Scottish housing market on hold because of Brexit
The Scottish housing market ended 2018 on a weak note with Brexit uncertainty still biting, compounding a continuing lack of stock and affordability issues.
Key activity indicators for Scotland slipped in December with national sales volumes dwindling, although beneath this headline figure some areas of the UK saw a more positive trend (East Anglia, Wales, the North East and Northern Ireland).
Short term sales expectations across Scotland were negative for the second consecutive month with a net balance of -23 per cent more respondents predicting a decline in sales over the next three months (the lowest figure since October 2011). The twelve-month outlook is a little more upbeat, suggesting that some of the near-term pessimism is linked to the lack of clarity around what form of departure the UK will make from the EU in March.
Despite this, house prices in Scotland remained steady, with a net balance of 19 per cent more respondents reporting growth during December. Looking ahead, this positivity stalls, with a net balance of -11 per cent of chartered surveyors expecting prices to fall over the next three months.
The twelve-month outlook for prices remains broadly flat across the UK. Furthermore, except for London and the South East, prices are anticipated to either rise or hold steady across the other UK regions over this time horizon.
Domestic issues related to lack of supply and affordability also continue to affect the market alongside uncertainty, with stock levels and buyer interest declining further in December. New buyer enquiries were flat during December, while the deterioration in new instructions continued to impact the Scottish market. The number of new properties coming on the market has now been in negative territory since March 2017 and has declined in 23 of the previous 24 months.
Furthermore, supply issues also remain evident in the lettings market, as landlord instructions also declined once again, rounding off a year in which they have fallen in all twelve months.
Simon Rubinsohn, RICS chief economist, said: “It is hardly a surprise with ongoing uncertainty about the path to Brexit dominating the news agenda, that even allowing for the normal patterns around the Christmas holidays, buyer interest in purchasing property in December was subdued. This is also very clearly reflected in a worsening trend in near term sales expectations.
“Looking a little further out, there is some comfort provided by the suggestion that transactions nationally should stabilise as some of the fog lifts, but that moment feels a way off for many respondents to the survey.”
Hew Edgar, RICS interim head of policy, said: “Given the current political and economic environment it is hard to see developers stepping up the supply pipeline to meet the quantum of new builds. Reaching the required 25-30000 homes per year building target was never going to be easy, but to reach anywhere near this figure the Scottish Government needs to explore other avenues for housing development across all tenures. The Government’s 50,000 social homes by 2021 target is commendable, but their focus needs expand beyond social housing and support other delivery models and tenures, such as self-build, custom build, built-to-rent and co-housing.
“Simultaneously, the Scottish Government must not lose track of existing properties and the maintenance requirements of current housing stock. If Government policy continues to be aimed exclusively at new supply, and the condition of older stock is not given due consideration, existing dwellings will continue to deteriorate, reaching a state of inhabitability in the near future. This will essentially negate new build figures and ultimately lead to viable housing supply in Scotland remaining static.”