As we head into the final stretch of 2016, there seems to be very little sign of things slowing down in the Edinburgh property market. All year we have seen demand from buyers exceeding the rate at which properties are coming onto the market and that continues to be the case. As a result, properties that are coming onto the market are typically selling very quickly and often for well above their Home Report valuation.
At Warners, we’ve seen properties that have sold over the last three months spending an average of just 22 days on the market before going under offer. That’s down from an average of 28 days during the same period a year ago.
With more competition amongst buyers, the premiums that they are now being required to pay to secure a new home have inched upwards. Sales through Warners between August and October this year have seen an average of 2.6% paid over and above the Home Report valuation, up from 2.1% a year ago.
As you would probably expect, where properties spend less time on the market, the premium required to secure them can be substantially higher and it is certainly not unusual now to see properties selling for 10% or more above their original valuation. In many cases properties will attract multiple notes of interest during their first two weeks on the market allowing the seller to set a closing date. At that point, interested buyers will be motivated to submit their best offer to secure a property making larger premiums much more likely.
More Homemovers Buying Before They Sell
Interestingly, one of the major factors that we are hearing from would-be sellers that is preventing them from putting their home onto the market is that they have been unable to find a property that they wish to buy.
Following the downturn in 2008 we went through a number of years where people would only be concerned with selling their existing property before turning their attention to their next purchase. At that stage properties were spending much longer on the market and there were far more properties to choose from meaning that sellers could feel fairly confident that, once their own property sold, they would be able to quickly find a new home that would fill their needs.
With the market having swung in favour of sellers, many people are thinking about their purchase first. Once they find a property that they want to buy, they will make an offer subject to the sale of their current home, at which stage they will then put their own property on the market and hope to find a buyer quickly.
No Signs of Brexit Impact
Although there has been much discussion about the potential effect of ‘Brexit’ on the market, to date we have seen very little impact in the local market. In many ways that is to be expected as the reality is that, for most people, nothing has changed since the outcome of the Referendum.
Interest rates remain low, earnings and employment levels are largely unchanged and, whilst the pound has declined in value that has actually made UK properties more affordable to overseas investors.
The expectation here is still that, as we move into 2017 and the terms of the deal start to be thrashed out, we will start to see a dip in buyer activity. Generally speaking, people tend to delay major financial decisions during times of uncertainty and as a result, some people will be likely to push back a purchase until details of the terms of the UK’s exit become clearer.
At this stage though, given the excess of demand over supply that we have seen over the last year, this should simply serve to bring more balance to the market and we expect conditions to remain favourable for sellers as we head into 2017.