The housing market in Edinburgh, the Lothians, Fife, and the Borders is always a topic of much discussion and speculation.
While some in the press have dangerously drawn comparisons to the housing crisis of 2008/2009 including the BBC who have paid for adverts on social media this week drawing such comparisons, it is important to note that the current market conditions are vastly different.
In this article, we will debunk the sensationalised myth of a housing crisis and highlight the reasons why there is much to be positive about in the local East Scotland housing market.
With data from Neilsons and also ESPC, the leading property portal in the region, we will explore the differences between the property market in 2023 and that of 2009, shedding light on the current state of affairs.
A Strong Property Market in Edinburgh and the Lothians
Firstly, it is important to once again stress that there is no such thing as the “UK property market” reflected on by journalists often based in the South East of England. The UK is a patchwork of local markets, each with its own unique dynamics. When examining the housing market and its performance, you must look at what is happening locally.
Contrary to press sensationalism, the Scottish housing market is far from experiencing a crisis similar to that of 2009. In fact, there are several reasons to be optimistic despite rising interest rates.
According to ESPC’s latest data, the average selling price of homes in 2023 is £278,008, a significant increase from the average selling price of £195,455 in 2009.
The average annual increase since 2005 in Edinburgh is 4.1% and prices are 48% higher than the height of the market pre-recession in 2007.
These upward trends demonstrates the value and stability of the market long-term.
In 2023 so far, ESPC report that 80% of properties are selling for at least Home Report valuation and the average percentage of Home Report valuation attained is 103.5%.
Furthermore, the time taken to sell a property has decreased significantly over the past 14 years.
In 2009, it took an average of 85 days to sell a home, whereas in 2023, the average time has reduced to just 22 days. This indicates a higher demand for properties and a more efficient selling process, and it is also one of the quickest selling times in the entire UK!
“Offers Over” or “Fixed Price”? What the marketing price structure can tell us about the market
One notable difference between the current market and that of 2009 is the number of homes available for a fixed price. Traditionally, sellers opt for fixed price listings to ensure a quicker sale. In 2023, there have been 970 homes listed at a fixed price usually after attempting an ‘Offers Over’ strategy, whereas in 2009, this number was significantly higher at 3,631 homes. The difference is even more pronounced when compared to 2008, where the figure reached an astonishing 9,639. The decrease in the number of fixed price listings indicates the market’s strength and the reduced need for sellers to resort to this method for a speedy sale.
Presently in 2023, “Offers Over” is still the most popular pricing structure, typically favoured in strong market conditions. At Neilsons, 86% of our listings have been marketed as “Offers Over” this year – higher than the ESPC average at 82.4%.
Improved Mortgage Market compared to 2009
The mortgage market in 2023 differs significantly from that of 2009, despite the rise in interest rates. In 2009, there was a credit crunch that resulted in a lack of lending, making it challenging for potential buyers to secure mortgages and the market was strangled from the base up. However, the situation has improved over the years. Selected lenders now offer 100% mortgages, providing first-time buyers with easier access to the market. Additionally, the UK Government’s mortgages charter has introduced responsible lending practices and stress-testing of mortgages to prevent a crisis of mass repossessions, as witnessed in 2009. These measures ensure a more stable and secure housing market for buyers and homeowners alike.
Although rising interest rates have impacted homeowners, resulting in increased monthly repayments, it is important to note that the current situation is far from the worst-case scenario. In most cases, buyers simply recalculate their affordability when an increase is announced and there is a short period of adjustment before the market ‘goes back to normal’.
The market has weathered more challenging conditions in the past, and the implementation of responsible lending practices offers some consolation amidst the difficulties faced by buyers.
“Cooling of the Property Market”?
There has been much talk about the drop in property sales across Edinburgh, the Lothians, Fife, and the Borders. However, a closer examination of the available data suggests that the market is simply experiencing a cooling effect after a period of intense activity which was not normal – or healthy – market conditions. This cooling is bringing the market back to more “normal” levels, similar to those recorded between 2016 and 2019. While the market may not be as frenzied as it was in the immediate post-pandemic years, it is still performing well and offering opportunities for buyers and sellers alike.
Impact of Economic Uncertainty?
Economic uncertainty has had some influence on the property market, leading to changes in plans for both buyers and sellers. Recent research conducted by ESPC reveals that two in five buyers have been affected by changes in mortgage rates amid the cost-of-living crisis. Some have delayed their plans to buy or altered their preferences regarding the type or location of the property they were considering.
However, despite these uncertainties, there is an encouraging trend of increased listings in the market in summer and the start of autumn. The gap between the number of listings in 2023 and the previous year is closing at ESPC, indicating growing confidence among sellers. At Neilsons, we have listed 10.9% more properties in 2023 than 2022. The activity in the market has inspired more homeowners to consider making a move to a new property, further contributing to the overall stability and resilience of the market.
While inflation and mortgage rates have been key concerns in the housing market for the past year, there are indications that inflation may have peaked. This suggests that the worst may be behind us, and gradual improvements can be expected. This is particularly welcome news for first-time buyers, homeowners, and investors alike, as it signals a more stable and favourable market environment.
In conclusion, it is essential to dispel the highly inaccurate notion that the housing market in 2023 is heading towards a crisis similar to that of 2009.
The current market conditions are significantly different, with higher average selling prices, reduced selling times, and improved lending practices. While challenges exist, such as economic uncertainty, the Edinburgh and Lothians property market remains robust. Sellers and buyers can take comfort in this fact.