In previous articles I've discussed how the residential property market of 2014 actually outperformed that of 2013. We witnessed increased interest and activity in the market this year, the referendum in Scotland notwithstanding. So what will 2015 bring? Will the market hold up? If only I had a crystal ball! Here are my predictions for the top trends and key forces driving the residential property market in the year ahead.
The referendum was a huge talking point for us in 2014. However, it has come and gone now. But has the uncertainty gone with it? There is still a big push for independence, and the unknown surrounding “devo max” is an unsettling factor. We can’t ignore the fact that the Smith Commission’s agreement to deliver greater taxation powers to the Scottish Parliament could have ramifications for the property market with potential changes in levels of disposable income and demographic shifts.
2015 will herald the changeover from Stamp Duty Land Tax (SDLT) to Land and Buildings Transaction Tax (LBTT) in Scotland. Whilst the actual LBTT rates and bands await ratification by the Scottish Parliament, the changes will, to a degree, influence different sectors of the market differently. Under the current proposals, £325,000 will be the approximate crossover point where LBTT will exceed SDLT levels. But, as everyone knows, “location location location” is the name of the game in property, so we will see the changes influencing the market differentially depending on location and associated property values.
Help to Buy
The Help to Buy schemes are changing, with the new build scheme seeing a reduction in capital value levels. This may have a bearing on those entering this market, as the reduced availability of support will restrict the purchase of new build properties to a lower level.
As an aside, albeit unlikely in such a short timescale, those who bought with assistance at the top level may now find themselves price-trapped going forward.
Registering land and property
We will be seeing changes to the property registration system in December of this year. Although this should not directly influence the supply and demand curves of the market, transactions may be disrupted as the new system beds in
Getting a mortgage
As always when we look ahead, the banks and lenders generally can’t be ignored. They bear directly upon the market, as their lending policies and criteria dictate whether individuals are able to purchase property. Their clout has actually increased in 2014 with the new requirements of the Mortgage Market Review. The new checks, in conjunction with an increase in mortgage applications, have lengthened the processing time required to have a mortgage formally approved. We now have the situation where many individuals and families can no longer coordinate a straight move but rather have to sell, take a short-term lease, and then buy their new home. This step never used to be required, yet it has become a growing trend, and one that I see continuing for the foreseeable future.
As in any area of business, the desire of the public to reduce cost in any transaction is a considerable force. This, however, often comes with a reduction in quality of service as the market separates into niche sectors. We are seeing new players in the estate agency market and there are an increasing number of sellers who would rather go it alone than pay for advice. These new trends will have, to some extent, an impact on the market.
In the same vein, with websites and mobile apps readily available, online property portals have become a major force in the residential property market. Within Edinburgh, the ESPC is a key player and, nationally, Zoopla and Rightmove are the two strongest portals. A significant new portal run by Agents’ Mutual is to start up in January and appears to have the backing of many agents in an attempt to break the Zoopla–Rightmove duopoly stranglehold. Watch this space!
I have written previously in blogs about the first-time buyer. With changes in the style of employment of the younger population and their continued international mobility, the average age of the first-time buyer is likely to stay relatively high. Coupled with a lack of housing stock, this will affect the rental sector of the market as investors position themselves in the main cities.
And we would be remiss not to mention transport. New developments such as the Edinburgh–Galashiels train link will open up attractive new property options to the Edinburgh commuter population.
Turning to the sporting calendar, there aren’t quite as many unmissable sporting events to distract the would-be purchaser, yet the Rugby World Cup and the Golf Open could still prove too compelling for some house hunters.
The bigger picture
Let's move away from Scotland for a moment and look to the wider UK, European and world economies. Continued uncertainty over the global economic outlook can affect the feel-good factor and confidence within a local population and influence their desire to move house.
So, all in all, a huge amount is happening, and I've only listed some of the potential drivers here. In addition, each of these factors can have a knock-on effect and shouldn’t be taken in isolation. It is more or less impossible to predict the coming year in the property market. One thing is certain, however: the market never stays constant. I'm looking forward to being a part of it all again in 2015!
Finally, if you are looking to make a move after the 1 April, 2015, the new Land and Buildings Transaction Tax ("LBTT") could affect you. You can read more about how it is structured, here.