Less Scaremongering and More Straightforward - Housing Market May 2023

What’s going on with the housing market in May 2023?

Previously on the Housing Market

To set the scene for how we found ourselves here, here’s a quick recap covering March 2020 to September 2022.

  • A global pandemic which spurred lifestyle changes for many people.
  • A 24% increase in house prices in Scotland, due to high demand and low stock levels.
  • In October 2022, the Mini-Budget was announced by Liz Truss (remember her?) which shocked the economic climate and caused a drop in buyer interest due to uncertainty in the economy.
  • Then a sharp drop in sales in Q4 of 2022.

Got it? If not we can explain it in one word… rollercoaster.

Right here, right now

In the first two months of 2023, we’ve seen a massive bounceback and market activity is above the pre-pandemic levels. However, the new supply has weakened even further, meaning that there is an enormous shortage of the type of houses people need available.

Buyer demand high + low supply of available properties + interest rates being a bit higher than they were compared to the most recent few years = a price-sensitive property market.

What on Earth does “a price-sensitive property market” mean?

Three-quarters of property purchases in Scotland are mortgage dependent so with higher interest rates meaning higher monthly payments and higher cost of living in general buyer’s affordability is stretched. Many buyers will put down a higher deposit for their purchase, making their loan a lower level and giving them more affordable monthly payments. However, this does mean they’ll have less cash to spend on the property once they’re in.

A lender will only let you get a mortgage based on the value of the property, which can sometimes (and typically is in the Edinburgh/Lothians competitive market) lower than the agreed purchase price. When a buyer pays over the Home Report value, they must have cash for the amount over the Home Report value to make up the difference. For example, if the Home Report value is £200k and the sale price is agreed at £210k, the buyer needs to have £10k in cash to make up the difference. This is on top of their deposit and buying fees.

If buyers are trying to use the extra cash they have to put down bigger deposits so their monthly loan payments are more reasonable, many buyers are going to try and take the cash they’d be paying over the Home Report value to put into their deposit instead.

So, what are these buyers looking for?

“Oven-ready” homes. They want properties that don’t require much work and are truly ready to move into.

Our advice?

Weigh up your options. If you’re a buyer, consider everything you would have to do if you were to purchase the property and work out an appropriate budget, before putting in an offer.

Sellers, get those odd jobs done so your property has that “oven-ready” advantage against the competition. Getting it painted and cleaned up (including shampooing the carpets) so that buyers don’t have to allocate their own budget to do these small jobs will cost the seller a little but will massively positively impact their sellability!

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Our property sales expert

"I bring a fresh perspective to the Scottish property market, making the sale process as straightforward as possible for clients. Building relationships and being part of the client's story, while helping them to achieve the best result, is my goal."

George Adun, Estate Agent