It is a sure sign that the property market is in rude health when, even in the middle of the seasonal lull – when buyers and sellers traditionally should be sunning themselves on a Mediterranean beach – professional offices are going like a fair.
There is no doubt that there is a shortage of supply across most parts of the country, but the number of people coming to market continues to be encouraging and good upset prices are regularly being achieved.
After seven hard years in the property market doldrums, it is no surprise that some sellers remain wary, but the perception seems to be filtering through that prices are up in many areas. Agents are hammering home the message: give us your house and we’ll get you a good price.
Good prices, of course, depend on a good location. That one factor remains the most important in the business, and the fundamental lesson is that people are better off buying the worst house in a good area than the best house in a bad one.
Some commentators have been rummaging in the gloom cupboard again recently with stories that prices are going down but, even if this is the case in Scotland – which I doubt – there are unusual factors at play.
Scotland upped the stakes in the UK tax regime in April this year when it replaced Stamp Duty with the Land and Buildings Transaction Tax (LBTT), which brought in rates of up to 12% on house and land sales.
The question is, how is this new imposition affecting the market, particularly the upper end? Buyers at the lower end – as was intended by the Scottish Government – are net gainers. In the middle, a house at £251,000 only pays £2100, compared to £7500 under the old system.
But someone contemplating purchasing a house at £500,000 – well within today’s aspirational range in most Scottish cities- has to find an extra £23,350 to meet the LBTT bill. And the few people who might want to buy a £1 million home face a whopping £78,350 in tax.
So it could be that average house prices are being hit by a slowdown in sales at the upper end. It would only take a few £1 million sales not going through to counterbalance dozens of sales in the £100,000 to £200,000 regions.
The upper bands of LBTT are very hefty hits on what is, after all a private transaction between a willing buyer and a willing seller – certainly they are much more draconian than in England, which has far more sales at this price level.
But the simple fact of the matter is that it is too early to say just what impact the tax will have on the market in the longer term. Certainly, in areas such as Bearsden and Milngavie on the outskirts of Glasgow, where high prices are more common, the market is flying.
There is no real evidence as yet that LBTT is at a rate which would discourage buyers of higher-priced properties, nor any real sign that offers are being adjusted downwards to take the tax into account.
Surveyors are still valuing on the basis that the tax has not yet had an effect, but as time goes by, they may have to factor it in. Their job, after all, is to interpret and reflect the market, not to make it.
That said, there are rumblings from the depths of Threadneedle Street that interest rates may have to start rising in the foreseeable future, and that may be a tipping point for LBTT-affected sales.
Projected rate rises of up to 0.75% could also have a dramatic impact on the country’s legions of average borrowers who have lived through a long period of low-rate stability. They certainly should be chasing some of the long-term fixed rates now on offer.
Across the board, in Scotland, prices still have some way to go until they see the highs of 2007 and 2008. Prices are only scaling these heights in specific hotspots in Aberdeen, Edinburgh, parts of Glasgow and places such as south Ayr.
I am still predicting a strong end to the year, with the proviso that a recovering market could be blown off course by the spectre of interest rate rises or wider economic factors.
But until we see real, sustainable growth in the economy and real incomes starting to rise in a meaningful way, it is likely that the market as a whole will meander for a while yet.
Eric Curran is managing partner of DM Hall Chartered Surveyors, based in the firm’s Glasgow North office.
