Residential demand flat in Scotland while shortages of homes for sale continues

Simon Rubinsohn
Simon Rubinsohn

Lack of supply continues to push up prices in the Scottish housing market and slow down demand, according to the March 2018 RICS UK Residential Market Survey.

Demand was flat in Scotland along with agreed sales in March 2018. Impacting these two indicators is the lack of supply in the Scottish residential market, exemplified by anecdotal evidence, as well as the new sales instructions indicator. In Scotland, the number of new properties coming on to the market has been falling for a year, with 10% more respondents observing new sales instructions falling (rather than rising) in March.

This lack of supply is a key factor affecting affordability, with respondents noting that the continued shortage of stock is driving up prices. In March, 30% more respondents noted an increase (rather than decrease) in prices at the headline level. Prices are anticipated to continue to rise over the near term too, with a net balance of +30% contributors, expecting growth over the next three months.

Moving to sales expectations, respondents are optimistic about near term sales with nearly a third (30%) also anticipating sales to grow over the next three months in Scotland. The picture for sales over the year ahead in Scotland is also optimistic with a net balance of +52% of contributors anticipating an increase in sales over the next twelve months.

In an additional question this month, respondents were asked whether they had seen an increase in the number of sellers withdrawing their property for sale from the market compared with a year earlier. Across the UK, respondents saw no change. However, in London, 55% of respondents reported a rise in the number of properties being withdrawn from the market, (compared with this time last year) with anecdotal evidence suggesting this reflects the differing expectations of buyers and sellers.

Simon Rubinsohn, RICS chief economist, said: “The latest RICS results provide little encouragement that the drop in housing market activity is likely to be reversed anytime soon. Apart from the implications this has for the market itself, it also has the potential to impact the wider economy contributing to a softer trend in household spending. This could make Bank of England deliberations around a May hike in interest rates, which is pretty much odds-on at the moment, a little more finely balanced than would otherwise be the case. The downshift in sales for the time being continues to be more visible in London and the South East with many other parts of the country continuing to show rather greater resilience. Feedback on expectations regarding transactions suggest this divergence will persist over the coming months.”

David Cruickshankl, MRICS, D M Hall, in Elgin, said: “The market is more subdued than the same period last year with fewer properties coming up for sale. Unseasonably cold and snowy weather is a possible influence, which could result in a busy late spring and summer as a catch up.”

Peter Drennan, MRICS, Allied Surveyors Scotland, in Edinburgh said: “Shortage of supply still the main issue in good quality areas. Prices (and some valuations) getting pushy in city centres and the like, but they sell.”

Peter McEachran, FRICS, Graham and Sibbald, in Renfrewshire said: “Still a shortage of stock. Good properties in good areas sell well. Properties needing upgraded are taking longer to sell.”

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