“As we transitioned from the Spring and into the Summer we detected a definite change in the marketplace. And the nature of that change is something we have seen previously in middle-to-prime in times of economic challenge: properties valued and selling up to and just beyond £500k continue to move well, with many viewers and potential buyers hastening sales. North of £500k, matters are slowing a tad, with those sales being more of a challenge. And in our market, homes north of £1m are witnessing fewer buyers.
Across the piece, our negotiators are seeing less urgency from buyers who – although keen to make a purchase – are giving more consideration to their options. All in, we’d encourage those thinking of selling to do so now while there remains buoyancy.
The full impact of the Bank of England’s rate change on 4th August will remain to be seen, but it’ll give everyone in the property sector food-for-thought.”
Iain Robb, Director, Robb Residential
Quarter 3 – 2022
In our last report we remarked that although the times were a-changin’, some of 2022’s staples remained – the war in Ukraine rumbles on but now appears to be a footnote in the national media, popping up when something particularly nasty or noteworthy occurs. One such element was the recent grain deal between Russia and Ukraine, and a first shipment getting underway. That looks like it could help alleviate some of the cost-of-living problems, albeit one report (for subscribers to the FT) suggests that Russian bombardments could jeopardise future safe loading of shipments.
When the media is not focusing on heat and other weather events, inflation and the impact on the cost of living are all-consuming, and it feels like every second news story or report is on the squeeze on purses and wallets.
But what does this all mean for the housing market between now and our approach to the onset of meteorological winter?
Inflation
The Bank of England’s outlook on inflation has been steadfastly proven wrong, and on the 4th of August their mindset caught up with the European Central Bank (ECB) and the US’s Federal Reserve who’d, at the last time of asking, raised their main rates by 0.5% and 0.75% respectively. Focusing on our neighbours, this was the first European rise in 11 years.
But the 4th of August announcement by Andrew Bailey, Governor of the Bank of England, was a “double-whammy” – the largest rise in 27 years, to 1.75%, allied with the prediction of falling into a recession this year: you can read the BofE’s report here.
To summarise its key messages: inflation will rise a bit more, hang around a bit longer, and a recession will help get it all under control. And the awarding of pay rises will not help matters. However, none of that plays out well in the popular media or on the high streets of the UK.
The property market has moved since Q2 and while it remains robust, the predicted fragility is now somewhat obvious. Inflation, rising interest rates, costs of living and energy prices – combined with geopolitical issues – could further sap confidence as the year progresses, although we are conscious some of our market remains insulated against these variables through fixed rates in both mortgages and energy deals.
Property capital values continue to increase (albeit at a slower rate) and sales are still performing well above home report valuations. And if anyone in meaningful power subscribes to this IMF blog, perhaps we can expect some Government price intervention in the energy market in a way that aids all consumers.
Demand for Country Living
This has long been a key portion of the market for Robb Residential, and it’s been a stroke of some luck that global events and how they have changed society have fuelled this part of the property sector. We see both the continued organic movement that we’ve always seen, as people come and go through different phases of their lives, whilst that post-pandemic dividend continues, as remote working and a blended home – office model continue.
As we’ve said before, the psychological effect of the pandemic remains: people are now alive to other possibilities and realities.
Although we are seeing the market segments behave differently across the pricing bands mentioned above, we have continued to see a busy marketplace, with properties attracting high numbers of viewings and multiple bids, with many homes changing hands at very keen prices.
It’s still an excellent time to sell, and Argyll and Bute – with its picturesque coasts and rolling, verdant farmland and hills – continues to be a mainstay. Another constant remains – there is great value to be had in Scottish countryside and coastal property, representing as it does a range of great options for those moving from a variety of UK metropolitan areas per se, as well as in comparison to Home Counties and the likes of Dorset and Cornwall.
Homeworking
Outwardly, this section of our report has just about run its course, so ubiquitous does homeworking or the blended model obtain.
One continued theme is the lingering effects of the pandemic – although not to do with homeworking directly, one anecdote springs to mind from some time at The Open Championship at St. Andrews. In a well-known hostelry in Elie your author ran into a trio known for around 15 years to have populated a well-known hostelry in Edinburgh every single Thursday evening. Come rain or shine, you could head to that pub as the weekend approached and a bunch would be at the right side of the bar imbibing and chatting – not any more, they reported. New habits, routines and interests have undermined their weekly symposium and it’s unlikely it will ever reappear, at least in its original format.
But back to homeworking, briefly – many expected to return to the office remain recalcitrant, and without incentive or a shove, this will continue. We’ve heard many a tale of those who’d prefer to resign or retire, rather than truly “return to work.” Even in the last few weeks we’ve run into people who we’ve not seen in ages, the result of them only popping into the office for the first time since March 2020. For those of us who feel we have hardly been away, this is somewhat mindboggling.
The cost-of-living conundrum could be interesting come the cooler weather as we head to full-blown Autumn. Might some who’ve steadfastly stayed at home opt to head to the office, rather than heat and power their own home?
However, all of this said, cities are getting ever busier and the demand for city centre renting and buying remains robust and on a par with other market geographies.
Lettings
We continue to see the lettings’ market remaining strong, with a shortage of quality stock in-and-of-itself, but especially in the desirable areas of the West End and Finnieston in Glasgow, as well as Edinburgh’s New Town, Old Town, and around that city’s universities.
Where stock does come on, there is competition for viewings and many of our lettings have been secured at the first time of asking. Informally, this could also be an offshoot of the pandemic, with tenants (students, young professionals, city workers on the move or with some flex) keen to ensure they do not miss out and willing to pay something of a premium.
Previously we have noted that the impact of staycations, resulting in less stock availability, combined with the pent-up demand for a continued need to have some access to cities, would continue to affect lettings – as yet, we see no material change to this trend, especially as cost-of-living increases may start to determine holiday destinations, especially for families. Add to this the frequent and stark scenes of piles of luggage, flight cancellations, industrial action and continued short-staffing across our transport sector and there’s a great incentive to holiday in the UK.
As we reported for Q2, most properties with long-term sitting tenants are under performing, yield-wise. Robb Residential are pointedly proactive with appropriate, annual rent reviews; landlords are benefiting, and this is leading to more instructions. And if a long-term tenant departs, we see some rental rate uplifts of around 25% per month, greatly boosting property income.
Lettings’ availability continues to feel the squeeze. We still don’t expect another spike in rental rates, but too many factors are at large to suggest lettings won’t continue to see robust yields.
House Prices
Given our views on market changes – and how various price segments are behaving – it’s not surprising this can be seen in a UK broadsheet as well as specialist business periodicals. However, to emphasise that the market is still positive for sellers and buyers, at the time of writing Halifax data has been published to show the average house price in Scotland has reached at all time high of £203,677, and a related Scottish Business Insider report highlighted it’s the increase that is slowing, from 6.9% per annum to 6.6%.
There is still lots of value in the Scottish market, especially middle-to-prime, where buyers can reap the benefits of great properties and homes at fantastic rates compared to the south of England, not to the mention that as the fallout from the pandemic continues, lifestyle-and-work-wise, Scottish coastal or country living means buyers can almost have it all.
In Conclusion
The year 2022 continues to be like no other in the careers of all at Robb Residential. Emerging from a pandemic to find a war on the cusp of Europe, along with energy and food cost uncertainty, allied with inflation, ensure a series of unprecedented factors have the potential to impact the housing market.
Although we have witnessed changing behaviour, so far that has only resulted in some properties taking a little bit longer to sell and the increase in house values slowing down.
For those looking for a change, or for some fresh scenery or the smell and taste of sea air, and for those looking to slow down their lifestyle from the hustle-and-bustle of the cities and the office, Scotland is still full of great properties offering great value.
With our 100+ years of combined experience in property, and with our principal Iain Robb’s long history of operating in these desirable marketplaces, Robb Residential are very well-placed to be your agent of choice. We offer true agency skills and advice: we don’t just promote and sell your home; we find the right buyer at the right price.
Robb Residential are an Estate Agent based in Glasgow who deal in a range of unique and beautiful properties in the middle-to-prime market in Scotland. For more information, please contact us, email or call on 0141 225 3880.
Note: statistics, percentages and references are correct at the time of writing.
