Thursday, May 15, 2014
Domestic buyers return to the Glasgow housing market
Over the past 12 months, 75% of buyers who purchased a property in Glasgow originated from the city itself, in comparison to less than 50% in Edinburgh and Aberdeen. This is the highest level since 2007 and reflects the diverse economic profiles of Scotland’s largest cities which have developed since the 1970s. In Glasgow it has been almost exclusively local factors that have driven property purchasing decisions, according to research in Slater Hogg & Howison’s City Focus Report on Glasgow.
With domestic demand driving the recovery in the housing market over the past six months, ‘essential purchases’ are starting to be made by first time movers following six years of low transaction levels. These are sales driven by households that have decided to stay put in their existing property, which in the short term can be cheaper than moving.The number of sales in the city is running at barely half the 2000 – 2006 levels meaning there have been 8,700 sales each year that didn’t take place between 2008 and 2013. The result has been a significant increase in the period of time between house moves. In 2006, the average homeowner in Glasgow moved home once every six and a half years, roughly in line with the Scottish average. However, by the end of 2013, they moved on average just once every 14 years.
Given the six years of low levels of transactions, there are households that are starting to get itchy feet. Although the number of buyers from outside the city has fallen 5% over the past year, they have been replaced by their Glaswegian counterparts, a reflection, in particular, of an improving jobs market which has seen GDP per capita grow to reach the 3rd highest level in the UK, behind only London and Edinburgh.
Renewed confidence amongst vendors
The number of properties on the market fell 12% year-on-year as the number of homes for sale grew more slowly than the number of buyers looking to purchase. It has been areas of Northern and Western Glasgow that have seen the largest falls in the number of properties available for sale. This has been driven by a larger number of cash and first time buyers who together comprise almost two thirds of the market. Both types of buyers don’t have a property to sell meaning stock is being replaced more slowly than it is being bought.
This increased demand combined with fewer properties on the market has put sellers in a strong position. The number of properties on the market that have had their asking price reduced has fallen from 18% to 5% over the past 12 months, the lowest level for five years.The average time taken to sell a property has fallen by 12 days over the past year to just 55 days, the shortest time since 2007. The result has been a renewed confidence amongst vendors. While rising asking prices have so far been closely matched by an increase in what buyers are willing to pay, if asking prices continue to increase at current rates there is a danger of a mismatch developing between the expectations of buyers and sellers.
The Commonwealth Games effect
The Commonwealth Games, in similar fashion to other large sporting events, offer the opportunity for homeowners and landlords to rent out their property given the additional demand for short term, high quality accommodation. The market for rental properties for the Commonwealth Games is almost entirely separate from the mainstream rental market, and as a consequence there has been no additional impact on the levels of available stock.
Homeowners looking to rent out their primary residence comprise around 85% of advertised Commonwealth Games rental properties. The remaining 15% are properties which are between tenancies and serviced apartments. Supply has predominantly come from homeowners advertising their own properties either privately or through an agency.
Asking rents vary significantly but achieved rents are in the region of £2,000 - £2,500 per week for a very well finished 2/3 bedroom property, around six times the amount a tenant could expect to pay to rent the property on a long-term basis. Despite a hefty mark up, the achievable premium isn’t large enough for landlords to leave their property untenanted for a sub¬stantial period of time in the hope of finding a tenant. As a consequence, there has been no impact on the supply of available properties to rent.
The experience of the Olympic Games in London shows that mainstream rents in the London Olympics host boroughs remained virtually unchanged in the run up to the Games despite a frenzy surrounding short term lets. Homeowners who do choose to price realistically are able to offer high quality accommodation in good locations and can market their property to the right audience have proven however that opportunities to let to tourists do exist.
Commenting Michael Luck, Managing Director of Slater Hogg & Howison, said:
“The recovery in the Glasgow housing market is rooted in the return of the first time buyer and the confidence they bring to the rest of the market. A lack of activity over the past five years meant that house purchases which weren’t essential were postponed, as confidence in the housing market evaporated.
“The Scottish Help to Buy Equity Loan scheme which launched in September 2013 has added to this growing sense of confidence. In the first three months of the scheme, it accounted for 1 in 12 sales of new property in Scotland. The scheme has been well received with 109 house builders having signed up to it and the scheme being actively used by house builders, with 1 in 4 new properties for sale in Glasgow under £400,000 available through the scheme.
“The strong performance of highly skilled employment markets and financial services in particular, has meant that demand exists, in particular, for high quality rental property. In the first quarter of 2014, half of moves in the rented sector were because of new or changing employment, up from a third in 2013. In the medium term, the supply of private rented sector stock will be boosted by the Commonwealth Games through the construction of a number of build to rent schemes. However, it is unlikely the games will have a significant impact on the number of available rental properties.
We will process your enquiry as soon as possible.
Thank you for your application, we are currently in the process of screening all applications. Unfortunately if you do not hear from us within 14 days your application has not been successful on this occasion. Thanks for your interest in Countrywide Conveyancing Services.
Please note for all our roles, successful candidates will be subject to the following checks:
There seemed to be an error processing your enquiry, please try again later.