Podcast: Property Expert Roundtable
What can we do to combat the Scottish Housing Crisis?
Welcome back to the ESPC Property Show! In this two-part episode, hosts Megan and Paul are joined by industry experts Matthew Gray from Gilson Gray, Amy Howard from Neilsons, and Derek Bryan from VMH to provide valuable insights for home buyers in Scotland. This comprehensive discussion covers the current property market trends, factors influencing property sales, and advice for navigating the purchasing process. They delve into market performance, the impact of seasonality, and offer predictions for the next six months. Whether you're a first-time buyer or looking to understand the Scottish property market better, this episode is packed with essential information.
Then in part two, delving into the political side of the housing market, they explore the impacts of rent caps, taxation, and offer potential solutions for first-time buyers in Scotland. Our guests discuss the unintended consequences of current policies, the challenges landlords face, and the broader implications for tenants and the housing market. Whether you're a first-time buyer or a seasoned investor, this episode is packed with valuable insights and practical advice.
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Key Insights
Current Market Trends
The episode begins with a discussion on the current trends in the Scottish property market, specifically how it has performed in the first half of the year. The experts note that despite concerns about the cost of living, the market has stabilised. Enthusiasm for buying remains strong due to various life events prompting moves, such as upsizing, downsizing, and changes in marital status. Additionally, there's a notable presence of younger first-time buyers entering the market. The stock of available properties has increased by 36% year on year, leading to more choices for buyers and a healthy market overall.
First-Time Buyers
The panel provides insights into the characteristics and financial capabilities of first-time buyers in Scotland. It is observed that first-time buyers today often have larger budgets compared to previous generations. For instance, some first-time buyers have budgets around £400,000, which contrasts sharply with the more modest budgets seen in the past. This shift is attributed to various factors, including changes in financial planning and higher property prices. The discussion highlights the resilience of this segment of buyers and their significant impact on the market.
Property Demand and Stock
The experts analyse the demand for different types of properties and the current stock levels in the market. There is a significant increase in the number of available properties, providing buyers with a greater selection. The lower end of the market, particularly properties attractive to first-time buyers, remains strong despite an influx of rental properties being sold. The mid-market, ranging from £250,000 to £550,000, is described as particularly buoyant, with both new builds and second-hand properties performing well. Overall, Edinburgh’s market is robust, with properties selling quickly and maintaining strong demand.
Impact of Seasonality
Seasonality plays a crucial role in the property market, with certain times of the year being more favorable for selling different types of properties. Family homes, for instance, are often listed to align with school term times, while flats may perform better outside of major holiday periods like the Edinburgh Festival. The discussion advises sellers to consider these seasonal trends to maximize their property’s appeal and achieve quicker sales. Understanding the seasonal patterns can help sellers and buyers plan their market activities more effectively.
Market Predictions
Looking ahead, the experts predict a continuation of current trends, with a stable market expected for the next six months. Key factors include the availability of more stock and the potential impacts of political events such as the upcoming general and Scottish elections. While elections typically cause a temporary slowdown in market activity, Edinburgh’s strong fundamentals—such as its high quality of life and robust education system—are expected to maintain the city's desirability and keep the market resilient. Overall, a balanced market with sustained demand is anticipated.
Advice for Sellers
For sellers, the panel emphasizes the importance of strategic planning and professional advice. One key recommendation is to sell one’s property before purchasing a new one to be in a stronger negotiating position. This approach helps sellers know their exact budget and avoids the complications of simultaneous transactions. The importance of pricing properties correctly to attract buyers and leveraging the expertise of solicitor estate agents for seamless transactions is highlighted. Sellers are advised to work closely with their agents to understand market dynamics and optimize their sales strategy.
School Catchment Areas
The significance of school catchment areas in buyer decisions is discussed, with an emphasis on how families prioritize proximity to good schools when purchasing homes. The potential impact of future policies, such as the proposed VAT on private school fees, is also considered, which could influence demand for properties in desirable school areas. Buyers are increasingly meticulous about researching school reputations and ensuring that their children can secure places in preferred schools, which continues to drive demand for properties in these catchment areas.
Impact of Rent Caps
Rent caps, intended to protect tenants, have led many landlords to sell their properties, reducing the availability of rental units. This shift has negatively impacted tenants, as long-standing renters are being evicted and properties are re-entering the market at higher rents. The policy has been detrimental overall, driving good landlords out of the market and exacerbating housing shortages. Landlords struggle to cover maintenance costs and interest rates without the ability to raise rents, further reducing the quality and availability of rental housing.
Taxation and Landlords
The additional dwelling supplement (ADS) tax in Scotland imposes a 6% surcharge on the purchase of additional properties. This tax has been a significant deterrent for landlords and investors, reducing the attractiveness of property investment. Many landlords are choosing to sell rather than face increased financial burdens. This has led to a shortage of rental properties, particularly impacting areas with high demand. The tax's unintended consequences include increased competition for lower-priced properties between landlords and first-time buyers, counteracting the policy's aim to support affordable housing.
First-Time Buyer Challenges
First-time buyers in Scotland face significant challenges due to the lower threshold for land and buildings transaction tax (LBTT), starting at £175,000. This threshold is particularly burdensome in high-cost areas like Edinburgh, where typical entry-level properties are priced much higher. Compared to other parts of the UK, where stamp duty starts at a higher threshold, Scottish first-time buyers are at a disadvantage. The high cost of deposits and the additional tax burden make it difficult for many to enter the property market, despite the availability of 100% mortgages and better loan-to-value ratios than in previous years.
Policy Suggestions
To support first-time buyers, experts suggest reducing LBTT for this group and reintroducing supportive schemes like the first home fund. These measures would alleviate some financial burdens, helping buyers secure better mortgage rates and afford necessary furnishings. Additionally, there are calls for innovative financing options, such as investor mortgages that encourage landlords to invest in quality housing. Government and private sector collaboration is also recommended to sustainably fund these initiatives and ensure they effectively address the needs of first-time buyers and the broader housing market.
