Factors Affecting the Property Market
The Seasons
We have emerged from a slightly unusual summer where the market was more active in July than normal and less active than normal in August.
In the coming months, there is a lot of property to be brought on to the market. This is the norm after people return from their summer holidays but the real question is whether or not the demand for this property, which undoubtedly existed before the holiday period, will return. The early signs are that the demand will continue to be there for desirable properties in desirable areas, particularly at the middle and top end of the market, for family houses in areas of good schooling. This is also likely to continue in ‘sought after’ niche areas like the West End of Glasgow and select pockets in Edinburgh.
Age
The demand for older properties is mostly always likely to be greater than the demand for modern properties. In one and two bedroom buy to let new build flats, in some areas there is a potential over supply of these properties but even where there is not an over supply, the supply is such that purchasers, and ‘buy to let’ tenants are in a stronger position, given the wider choice available to them.
Interest Rates
The increase in interest rates has undoubtedly had an effect at the lower end of the market, particularly for first time purchasers and to some extent second purchasers but seems not to be affecting the middle and top end of the market, where the additional interest charges tend not to be material in relation to the levels of borrowing.
Stock Market
One of the other factors which may be affecting the market is the recent uncertainty in the Stock Market. Wide swings in the Stock Market tend to produce uncertainty in the property market and this can affect overall confidence in the market. Over the longer period however, a fall in the Stock Market is likely to increase the demand for property although this tends to be amongst professional investors in the buy to let market. When the Stock Market last fell many home owners however decided to invest in property as a hedge against Stock Market fluctuations and it is now the case that many more people have a second property as an investment not as was historically the case as a holiday home. A growing number of people are now slowly building property portfolios as an alternative investment and this has bolstered the property market particularly at the bottom and lower middle range of the buy to let property. Again the older property tends to perform better in this area because of the limited number of properties available for purchase and the tendency towards better return from rental on these properties.
Confidence
The biggest single factor in the market still tends to be the confidence of the purchaser and this is best reflected in whether people buy before they sell. Until now and for the last few years the vast majority of people, for good reason, have chosen to buy before they sell and at the moment there is no sign of this changing. There are however increasing numbers of fixed prices appearing and if this continues it may be a reflection of sellers experiencing difficulty in at least selling at the prices which they seek. This could be the first pointer towards the market changing if it results in purchasers then deciding to sell before they buy. The next two months should be very interesting and will tell us a lot about the property market for the next twelve months.
Article compiled by Lawrence Marshall
Posted by Sharon Clift on Oct 05, 2007
