Since Britain voted last year to leave the EU, one of the major talking points has been what impact Brexit will have on property prices.
The number of housing transactions during the second half of 2016 in thje UK was down by nine per cent annually. Interestingly, this is not something that we have seen in the Scottish market. During the last six months of 2016 Registers of Scotland recorded a total of 54,875 transactions. That’s almost identical to the figure of 55,386 recorded during the second half of 2015.
We also have to consider whether there is actually an element of cause and effect in the UK-wide figures. Just because sales volumes were lower across the UK than during the second half of 2015, that doesn’t mean that any decrease in volume is attributable to the referendum.
To the extent that sales have been constrained, this has been almost entirely due to a dearth of properties coming on to the market. Many potential sellers are reluctant to put their property onto the market until they find a property that they want to buy, and this has led to a substantial excess of demand over supply.
One factor that is often cited as having led to a perceived downturn in sales has been the idea that overseas investors have been scared off by the result of the vote. If anything, however, the opposite is true. Since the referendum the value of the pound has fallen, making property in the UK comparatively cheap for those looking to buy from overseas.
The reality is that since the result of the referendum, very little has changed in the Edinburgh property market, perhaps unsurprising for the simple reason that, at this stage, we still haven’t left the EU.
Whilst it would be wrong to completely downplay the importance of perceptions and expectations, the market is ultimately dictated by the economic fundamentals underpinning it. Interest rates are still low, making mortgage repayments more affordable, unemployment is comparatively low despite a recent upturn north of the Border, and the rate at which we are building houses is still not sufficient to keep pace with rising household numbers.
The true impact – positive or negative – of Brexit won’t actually be known for quite some time yet. As the terms of Britain’s exit from the EU are only now being negotiated, it is much too early for anyone lacking a reliable crystal ball to make forecasts with any certainty. Downside risks certainly exist, but that is true of any market regardless of the political landscape.
What we can say with certainty is that we are continuing to see an especially strong market for sellers in Edinburgh and the Lothians.
That’s good news for investors and anyone looking to downsize, but less positive for first-time buyers or anyone looking to move up the property ladder. We do expect to see some improvement in the supply of properties coming up for sale as the year progresses and this will help bring a little more balance to market, but the balance of power is likely to continue to favour sellers for the foreseeable future.
David Marshall is Operations Director with Warners Solicitors & Estate Agents