Scottish house prices and rents set to rise as supply ebbs

Sales activity in the Scottish residential market is easing, and a slow start to 2017 is expected due to a lack of stock, according to the November RICS Residential Market Survey.

Although the number of prospective buyers in the Scottish housing market has increased for the second consecutive month in November, with 21 per cent more surveyors reporting a rise in new buyer enquiries rather than a fall, sales were more or less flat over the month; with 5 per cent more surveyors actually reporting a dip in transaction volumes.

Supply shortages remain a constraining feature in Scotland in November and the growth in demand, albeit only modest, alongside a lack of new instructions, has led to a further increase in prices. Indeed, as stock continues to dwindle, the headline RICS price balance for Scotland continued to signal rising prices with 26 per cent more respondents seeing a rise, extending a of uninterrupted price growth dating back to 2013.

What’s more, near term expectations continue to point to rising prices over the coming three months with 25 per cent more surveyors anticipating an increase (rather than a decline).

Meanwhile, prices are projected to rise, to a greater or lesser degree, across most parts of the UK. The outlook over the year to come is positive in Scotland with a net balance of 53 per cent of respondents forecasting house price growth.

In the lettings market, respondents noted tenant demand was flat, as is usual around this time of year. Meanwhile, new landlord instructions fell notably at the headline level with 47 per cent more contributors seeing a decline rather than a rise. Tenant demand continues to outpace supply across most areas and rents are expected to continue to rise.

Simon Rubinsohn, RICS Chief Economist, said: “A key issue for the housing market is the slowdown in transaction activity since the spring which is clearly being reflected in the RICS Agreed Sales data as well as in official figures. Although there are some signs that the numbers may begin to edge upwards in the new year, the combination of macro uncertainty, the on-going supply shortfall, with stock levels around historic lows, and the myriad of tax changes impacting on buyers suggest that any pick-up in activity will be relatively modest. This is significant not just for the housing market itself but also for the wider economy given how much of consumer spending is tied in with home purchases.”

Thomas Baird MRICS from Select Surveyors Ltd, Glasgow, said “Increased demand due to low levels of new housing stock has seen increasing prices paid. Lack of stock along with festive period approaching may result in a slowdown of survey instructions earlier than last year.”