LOOKING back on what has been yet another landmark year for Scotland’s property market one thing remains abundantly clear: homeowners today have become inured to events which, a generation ago, could have induced widespread panic.
Now, in light of past experience, homeowners simply pause briefly to digest the latest blip, be it the economy, Brexit vote or general election, before resuming life as usual.
As a result, the Scottish residential market has been generally unaffected by the vote to leave the EU, despite all the gloom and doom predictions and scaremongering at the time.
However, the same cannot be said of LBTT, which continues to make its mark on the sale of properties over £500,000. From an analyst’s point of view, Faisal Choudhry of Savills says the slowdown in the Aberdeen area has reduced the rate of growth in overall activity.
The market below £500k has benefitted from relatively lower rates of taxation and has performed well in commuter and suburban locations such as Midlothian and Renfrewshire.
He says: "Above £500,000 up to £1 million is still adjusting to the relatively higher rates of taxation, while above £1 million, the market has remained stable with the majority of sales taking place in Edinburgh, Glasgow and East Lothian.
"We are unlikely to witness meaningful growth in values over the next two years as negotiations to leave the EU get under way, after which we expect buyer confidence to return and a bounce-back in values, underpinned by continued low interest rates. Value growth in the hotspots of Edinburgh and Glasgow will outperform overall Scottish values."
So far at any rate, it appears to be business as usual but as Brexit is still some way off and no one knows how it will pan out, rising uncertainty and anxiety could slow the market as some homeowners will opt to sit on the fence until the way forward becomes clear.
Below, Scotland’s top estate agents assess teh past year, give their views on the impact the Brexit vote has had to date on sales up to and above £500,000; what they forecast for the Scottish property market if and when Article 50 is triggered; and whether they have seen an increase or decrease in sales volumes since the vote….
Iain Robb, director, Robb Residential
Post Brexit vote and to date, our sales rates for properties up to £500,000 have held firm and show a small increase over the same period in 2015, however, sales above £500k have softened a little. Intelligence gathered from real buyers supports the view that this is due more to the hikes in LBTT, second home taxes and the uncertainty caused by INDY2, as opposed to any Brexit effects. We have no evidence of capital gains or contraction.
We anticipate the disentangling exercise will not be easy, however, the prolonged period of associated uncertainty across the entire economy has, in our opinion, the potential to be more toxic to capital growth and the pace of sales in the middle to prime residential property markets. In times of uncertainty, fewer people are willing to sell, which in turn reduces supply and can put upward pressure on prices. This could explain our increase in activity in the third and fourth quarters of 2016.
We have witnessed an increase in sales activity and a modest reduction in selling instructions. We regard the sales increases as nothing out of the ordinary and the modest reduction in selling instructions as seasonally normal. No spike upwards or downwards is evident at this stage.
Andrew Perratt, director, Savills
After the shock of Brexit we had expected the market to suffer more than it has, although it is affecting residential markets in other parts of the UK. If anything, it has pushed buyers north of the Border, with 30 per cent of our new applicants since Brexit coming from outside Scotland, which is higher than it has been for five years – and especially relevant to the market above £500,000.
Article 50, if and when it is triggered, is likely to have an impact on transaction numbers rather than prices. We know markets do not like uncertainty and negotiations are likely to concern some discretionary purchasers rather than those with a need to move. Prices in Scotland still look comparatively low compared with other parts of the UK, such as London, northwest England and the Midlands, where prices are now in line with their 2007 peak. If anything, sales above £500,000 have increased since Brexit. The return of English buyers, combined with homegrown buyers becoming resilient to a fast-changing political landscape, has improved conditions.
Having seen two referendums, a general election as well as local Scottish elections, many buyers and sellers are keen to move on with their lives.
Sharon Donaldson, retail director Scotland and North East, Countrywide Group
The triggering of Article 50 will be less of a shock than the actual vote, as negotiations will be ongoing over a long period. However, it seems probable they will have at least some effect on both the economy and the housing market and while the London markets may be more susceptible than Scotland as a whole, large cities such as Edinburgh could also see a degree of further uncertainty, particularly if financial markets are badly affected by the UK’s exit. That said, the true picture will only be evident once negotiations are concluded.
The market has already shown signs of adjustment, with the months immediately after the vote quieter than normal. But activity levels have steadily recovered and it’s likely the number of sales in 2016 will be on par with 2015.
Prime markets are also showing signs of a pickup after adjusting to the higher rates of stamp duty. As the vast majority of the Scottish market is domestic, people will continue to move for personal, family and employment reasons whatever the outcome of negotiations.
Douglas Nicol, director, Nicol Estate Agents
Buyers are still viewing and sales are being agreed and confidence is returning to the housing market after the initial shock of the Brexit vote – and there are signs that prices and sales will rise in the coming months.
The change in LBTT continues to affect sales at £500,000 and above, although there are buyers here searching for their dream home. Overall our sales and new listings are up on the same period in 2015. UK interest rates are at a record low and in many areas, particularly East Renfrewshire, we have seen a shortage of property with demand outstripping supply, resulting in more closing dates and premium prices been achieved – in some cases, the highest prices achieved in many years.
Article 50 is likely to bring with it a period of uncertainty and change, which could see a small reduction in the number of sales in the short term. Going forward, we believe the market will continue the upward trend. Once Article 50 is triggered there will be two years when the UK is still formally part of the EU and while we will continue to review our market on a week-by-week basis, we remain cautiously optimistic.
Dr. John Boyle, director research and strategy, Rettie
The Brexit effect is now acting as a drag on economic growth and creating uncertainty, which is impacting on the housing market, with October showing transactions down 18 per cent across house price bands compared to October 2015 and although currently only modest, this slowdown may deepen if economic conditions deteriorate. The top end of the market tends to get hit first, however, the main dampener on this sector is LBTT, which has significantly slowed sales over £500,000 and especially over £750,000. Some reform to LBTT bandings may help.
Few forecasts are projecting a recession, so the consensus view would be a slowdown in the housing market – but nothing like that of 2007-09, when the market suffered a 70 per cent fall. It all depends on how the economy fares and if we get a post-Brexit bounce or slump.
Immediately post-Brexit we sold a large number of houses – as many in the day after the vote as we normally do in a week, highlighting a belief that, ultimately, even a Leave vote was not perceived as worrying as first thought. However, the top end of the market has reduced since the summer and failed to bounce back as normal in the autumn, which also appears to be happening in the rest of the UK.
Douglas Telfer, partner, Aberdein Considine
Immediately following the vote we saw a slight dip in the market due to uncertainty regarding potential repercussions but this was short lived and confidence returned. Sales under £500,000 continue to be buoyant in Glasgow – and those above £500,000 have generally been unaffected, as the real issue impacting on this market sector continues to be LBTT rates.
I expect a similar knee-jerk reaction if and when Article 50 is triggered, as in an initial slight lull in the market attributable to uncertainty. However once buyers and sellers realise the property market will be unaffected by Article 50 confidence will return.
Regarding sales volumes, in Glasgow there has been no significant impact. Lack of stock has been our problem throughout 2016 and will continue to be the most challenging issue in 2017.
Gary Thomson, managing director Clyde Property
Sales dipped briefly in June after the EU vote but quickly recovered and during the last quarter have increased by 14 per cent across all 11 branches throughout central Scotland. Currently, the market up to £500,000 is very strong and there are plenty of buyers and closing dates for almost every property.
Over £500,000 the impact of LBTT has slowed activity and sales – and even more so in the over £1 million sector. There is an element that says trophy houses are now less appealing as homeowners choose to use disposable income to enhance their quality of life in other ways.
I do not believe triggering Article 50 will have an impact on traditional family homes up to £500,000. However, uncertainty and anxiety surrounding the possibility of another independence referendum could initially have a negative effect on our economy and encourage people to hunker down and do nothing until the way forward becomes clear and activity returns to normal.
Steven Lucas, sales director, Vanilla Square
There was an immediate knee jerk reaction and a number of fallen through sales following the Brexit vote – but it was short-lived and given the lack of property on the market and increased demand, prices remained firm and sales continued as normal. Properties above £500,000 had been notably slower prior to the vote largely due to the significant rise in LBTT at higher levels.
Triggering Article 50 is likely to prompt another knee jerk reaction and possibly a stall in the market, but it will not stop the need or desire to move house – and if the shortage of stock continues over the course of next year, we should witness a resilient market. Prices may be steady as opposed to increasing, but I think the volume of transactions might increase. Demand has outstripped supply
Throughout 2016 and property prices have moved on. Despite Brexit, we have seen no significant change in the volume of property coming to the market. This has only further bolstered prices and closing dates are still a regular occurrence.
John Kelly, managing partner, Corum
Our sales continue to grow strongly year on year up to and over £500,000 with no apparent deviation since Brexit other than a slight stutter immediately after the result of the vote.
The fundamental of the market is that demand continues to exceed supply, enhanced by widely accessible funding and the inherent low cost of mortgages; therefore prices of most property styles should remain resilient. Following many recent milestones, such as the independence referendum and general election, the public has shown a remarkable capacity to simply follow their instincts and do what feels right for them. Expert economic forecasts have proven to be very unreliable at best and in the absence of hard evidence, rather than speculation, public sentiment remains positive. As long as sentiment remains the same then current market forces will largely prevail.
Following on from the Brexit vote, sales volumes have remained in line with expectations, given some initial shock reaction immediately thereafter and taking account of seasonal factors since the vote.
Chris Chalmers, sales director, DJ Alexander Glasgow
Property sales up to £500,000 have not been greatly impacted by the Brexit result, in fact the market is buoyant and present demand is outstripping supply. Properties above £500,000 have not been directly affected by the vote – more so by the changes in LBTT. Brexit has increased purchasers’ hesitation, however, and has presented more of a chokehold on properties within the higher tiers of the market.
The matter of when and how Article 50 will be triggered and its impact on the Scottish market is purely speculative. Scotland offers fantastic investment potential and overseas and London-based property investors may be in a position to gain higher returns from Glasgow or Edinburgh compared to other UK cities. There has been a degree of hesitation from some purchasers but overall the market remains buoyant. The situation immediately following the EU referendum result was very similar to the circumstances following the Scottish referendum vote in 2014, when the marketplace halted for a few weeks before normal protocol resumed.