Don’t be fooled by negative housing market headlines

16th Jun 2023
David J Alexander
Don’t be fooled by negative housing market headlines - D. J. Alexander

In his latest column for The Scotsman, David Alexander predicts that the Scottish property market will perform better than national critics are suggesting. The column reads:

There have been a number of negative headlines in the media over the last week or two stating that house prices have experienced their first annual fall in 11 years, and the market is set to fall further as inflation remains stubbornly high resulting in higher mortgages costs.

The tone is one of serious doom and gloom and reading these headlines you might assume that this is a UK-wide issue.

However, reading further into these stories you find that “Prices had fallen in the South of England with all other areas – except Wales – recording slowing annual price growth.” It also states that “A buoyant market a year ago was the major reason for the year-on-year fall."

The problem with alarming headlines followed by reasoned explanations is that many people will only remember the headline and imagine that the housing market is in some sort of freefall. The housing market is very much sentiment led and when people are confident then prices remain strong but when people are pessimistic and believe that things are going to get much worse you can initiate an unnecessary fall in prices.

These exaggerated and bold proclamations can produce an enormously negative impact on buyers and sellers. We don’t want to talk ourselves into a downturn in the housing market when it benefits no-one and could harm economic recovery.

Looking at Scotland’s property market over the last year (from April 2022 to March 2023 which is the latest period available) produces a similarly mixed picture. Overall average housing prices have risen by 0.5 percent in the country as a whole; are 1.7 percent higher in Edinburgh; down 0.4 percent in Glasgow; down 1.8 percent in Dundee and down 8.1 percent in Aberdeen.

This is, as is to be expected, a very mixed bag but still an average price increase overall at a time when we are told prices are falling. In Scotland it simply isn’t the case that average prices have had their worst fall in 11 years, so it is important that we aren’t reading a negative UK message that doesn’t apply north of the border.

That isn’t to say that we won’t have a fall in prices in the coming months but there is a very real concern that buyers and sellers may be put off entering the market by this news when there is no major problem at present. If anything, some parts of the market – such as Edinburgh – are in the midst of a mini-boom with properties selling in a matter of weeks for much higher prices than the home report.

That is not to say that there will not be a price correction. The market has experienced double digit rises for the last two years which is unsustainable, so a correction is both inevitable and welcome. Enormous rises pose a very real risk of boom and bust whereas steady annual increases create a stable market which is better for buyers and sellers in the long run. Therefore, a slowing of annual increases was always on the cards following the post-pandemic price rises and would have happened with or without the recent hike in interest rates.

Messaging is important and ensuring the market is well informed is crucial so that buyers and sellers can make an informed decision based on the facts in their area rather than data that may apply to another part of the UK housing sector but has little relevance to the section of the country you live in. We need to keep a calm head when talking about the housing market and understand that there are enormous price, availability, and demand variations in different parts of a city never mind different areas of the country. The property market never has been, and never will be, homogenous and there are serious risks in treating it as such.