Property volumes increase as owner behaviour changes
Prior to 2020, you knew that most areas would increase in value by maybe three to four per cent a year with some hotspots cropping up here and there, but gradual price progression was generally the order of the day.
Since the pandemic, there has been a sea change in the way in which people think about their homes. How they live, what they want from their property, and where they want to move have all changed quite markedly over a very short period of time.
This is due to a number of factors but clearly working from home has shifted the need to be in certain locations and increased the desire for more space at home, access to the outdoors, and good commuting routes for those days when you need to get to the office.
While this has resulted in an enormous increase in demand for detached and semi-detached homes in out-of-town locations there has, paradoxically, been an equal and opposite move for inner city living. The result is a market that, in some areas at least, is booming for out-of-town properties but also for city centre homes.
It seems that while the initial reaction of many to the pandemic was to literally run for the hills this has been tempered by the actual experience of rural and remote living and some have decided to return to city life with its easy access to bars, restaurants, and shops. We, therefore, have a kind of push/pull effect of people leaving cities for the country and leaving the country for the city.
But we have also had a situation where prices in some parts of the country have remained stable or are even rising in Scotland at a time when they are falling in the rest of the UK. But perhaps this is about to change.
Our latest analysis shows that the number of properties advertised for sale has risen to levels not seen for years. Normally you would expect an increase in the volume of houses advertised for sale to result in a softening of prices.
With the number of properties advertised for sale rising by nearly 50% in some parts of Scotland over the last year you would expect this to result in lower prices. The number of properties advertised in Edinburgh, for example, has risen by 47% between October 2022 and October 2023 and this month reached its’ highest level since July 2015.
But this is happening across much of Scotland with volumes up 43% in Inverness; 41% higher in Dundee; increased 12% in Glasgow; 6% up in Perth; and 3% down in Aberdeen.
This could be the first signs of a slowing market with more properties sticking or it could be distressed sellers desperate to sell as affordability issues arise from growing mortgage costs. Traditionally the greater the supply the less demand but I am not so sure the relationship is quite so linear.
Even looking back on previous periods when the volume of properties was high there was only a slight correlation between high volumes and lower prices. For example, in July 2015 when volumes were slightly higher than October 2023 prices did dip but were still 3.2% up 12 months later. In November 2020 when volumes were only marginally lower than the latest month average house prices barely dipped at all and were 10.7% higher the year after.
We now see a Scottish property market which remains remarkably resilient with some property types such as detached and semi-detached homes unaffected by rising interest rates and greater availability.
While this may appear to be incongruous and potentially unsustainable it remains true for the moment. This is perhaps simply pent-up demand, coupled with an unprecedented desire to get the home you want almost regardless of cost, but it has created an enormously different housing market in Scotland than before the pandemic.