Scotland housing market remains subdued but optimism for 2018 remains - RICS

In November, new buyer enquiries were flat across Scotland.

RICS said last month saw -4 per cent more respondents saw a fall in new buyer interest, which it said reflected that once again the lower end of the market is more active.

Newly agreed sales also remained flat in November across Scotland. With the exception of Wales and Northern Ireland, where the feedback on the sales picture was reasonably positive, the numbers were either a flat or negative across most other areas of the UK.

But going forward, 29 per cent more respondents to the Scotland survey expect sales to pick up across the coming three months. This is despite new instructions to sell continuing to deteriorate in November, as the supply crisis continues (-22 per cent net balance over the month).

To give some idea of the future of new instructions coming on to the market, contributors were asked to compare the number of appraisals that were undertaken in November with the same period last year. Nationally, the largest share of respondents (49 per cent) noted appraisals were lower, while only 15 per cent stated they were higher on a like for like basis. As such, this does not bode particularly well for the new instructions pipeline.

However, contributors are optimistic that the market is going to gain momentum in the coming months and expect possible Budget changes to bolster the market in 2018.

Chris Highton FRICS, from Allied Surveyors in Edinburgh said: “There is the usual winter downturn. It will be interesting to see what effects the England and Wales stamp duty changes have when the Scottish budget is announced. LBTT still restricts activity at the higher end of the market.”

Kevin Hay, MRICS from Allied Surveyors in Ayr added: “This is a quieter time of the year as some sellers are on holiday or people are putting off listing their houses until the new year.”

On prices, RICS found the Scottish house price balance is underpinned by the continued lack of stock in November, with 35 per cent more respondents seeing prices rise last month. Once again however, there were significant variations at a regional level. London continues to see the most negative sentiment, 54 per cent more contributors seeing a fall in prices rather than a rise. Alongside this, both the South East and East Anglia also reported negative price trends. Elsewhere, the price balances were slightly negative in the North East, but stronger in all other regions/countries in the UK. In particular, solid gains were reported in Wales, Northern Ireland and the North West region.

Looking forward, the three month price expectations are also optimistic in Scotland as the net balance moved to +24 per cent from +22 per cent in October.

Looking at price expectations across other regions, sentiment again remains particularly cautious in London and the South East but, in contrast, contributors are confident that prices will rise in the North West, Wales, Northern Ireland and Scotland during the three months ahead.

Hew Edgar, RICS policy manager, Scotland, said: ”Once again, the most common theme returned from Scotland’s survey respondents involves LBTT and the negative impact it is having on the middle house price bracket and above.

“Reviewing the operation of the current LBTT should be a Scottish Government priority as its current framework is limiting market activity from the middle to the prime brackets in Scotland. Not necessarily transactions, but instructions to sell and interest in marketed properties, and this is having detrimental trickle-down effect in other house price brackets.

“There have been suggestions that the Scottish Government will emulate the UK Government and scrap LBTT for first time buyers. Whilst this may stimulate activity at a time when the market is subdued, it does not tackle the overarching problem of a lack of suitable accommodation across the housing tenures. Similarly, the current LBTT regime is already aimed at assisting first time buyers and those operating in the lower end of the house buying market. Whilst further support could enhance affordability, it could also increase the number of participants operating in the lower end of the market which could serve to increase house prices.”