Record number of Edinburgh homes sold via '˜offers over' system
THE number of houses in the Capital being sold through the 'offers over' sealed bid system has soared past the previous peak, driving prices above home report valuations.
Analysis from the Edinburgh Solicitors Property Centre (ESPC) has found 83.8 per cent of properties in the first quarter of this year are on the market for an offers over price.
The sealed bid system, whereby buyers submit an above-asking price offer for a property following a closing date without knowing what other interested parties will bid, has been criticised for encouraging would-be home owners to stretch themselves to their highest possible offer.
In this situation, it is possible that a successful buyer could end up paying a huge premium over the next highest bid – and more than the valuation price.
The latest figure is greater than the number of offers over homes in both the first quarter of 2004 and the first quarter of 2007, when the proportion of properties for sale at offers over was at 76.5 per cent and 72.9 per cent respectively.
The number of properties sold during the early months of 2016 was similar to those years.
These were periods when the property market was at its most buoyant ahead of the recession and subsequent property crash, which hit in 2008.
In 2009, just 13.4 per cent of homes were sold after going to a closing date, with the rest marketed at a fixed price.
Maria Botha Lopez, business manager at ESPC, said: “One of the reasons we are seeing this high number of properties marketed as offers over is that sellers and their solicitors have greater confidence in the market, and know that they can achieve a selling price over the Home Report valuation.”
While properties are selling for more than the asking price, the amount vendors are paying is an average of seven per cent above the asking price. This is higher than the typical 5.8 per cent premium commanded last year, but well below the property boom of the early 2000s, when buyers paid up to 30 per cent over the asking price in a bid to secure a property.
Almost two thirds of properties – 62.4 per cent – exceeded their home report valuation in the three months between February and April this year, compared to just half in the same period last year.
Edinburgh property solicitors said they had noticed that an increasing number of home sellers are opting to put their property on the market at an offers over price.
David Marshall, business manager for Edinburgh estate agent MOV8 Real Estate, said that the rise in popularity of the offers over system had been gradual. “There has been a steady increase in offers over properties, particularly in the past two to three years, and that has resulted in us returning to levels we have not seen since 2007 to 2008,” he said.
“However, the premiums being achieved are still lower than the 25 to 30 per cent over the asking price that we were seeing in those days.”
Andrew Stephen, partner at Edinburgh-based property firm Murray Beith Murray, said the rise in the offers over system had been fuelled by a growing gulf between the levels of supply and demand.
Although the ESPC report showed that the number of new homes brought to market between February and April increased by 2.5 per cent, the market is still suffering from a lower than usual number of homes for sale.