Following a rapid start to 2018 there have been further signs of a levelling off in the Edinburgh property market as we head towards the end of the year. Although most properties are still selling quickly, the high premiums that were being achieved above Home Report valuation earlier in the year have become less prevalent.
During the third quarter of 2018 there was a notable rise in the number of homes coming onto the market. In the three months to September, Warners recorded a 19% annual increase in the number of homes being listed for sale. This improvement in supply naturally means that there are now more homes on the market. As a result there are fewer buyers competing for each available home allowing buyers to secure properties for lower premiums than were required in 2017 and early 2018.
In the three months from July to September the average premium paid over Home Report valuation to secure a property was 5.3%. That’s down from 6.0% during the same period in 2017 reflecting the fact that the pressure on buyers has eased somewhat.
It is worth noting that despite this fall there are still cases where very high premiums are being achieved. Almost one in 10 properties sold over the last three months achieved a premium of more than 15% above valuation, with one in five achieving a premium of more than 10%. These high premiums are becoming less common however and sellers are often having to accept prices closer to their valuation.
David Marshall, Operations Director with Warners explained: "Throughout 2017 and during the first few months of 2018 there was a real shortage of properties being brought to the market. This created a situation where demand from buyers vastly exceeded the supply of homes available for sale. In most cases there were multiple buyers competing for the homes that were on the market allowing many sellers to set closing dates and achieve offers well above their property’s Home Report valuation.
"As we have noted before, this created significant issues for buyers, especially those looking to get onto the property ladder for the first time. Lenders are only willing to lend up to the Home Report valuation of a property meaning that if you want to bid more than the valuation, you will need to have that additional cash on hand in addition to your deposit. Many first-time buyers simply don’t have the cash reserves to allow them to do this, leaving them unable to compete at closing dates.
"More recently though we have started to see an improvement in the number of homes coming onto the market and this has helped to bring a better balance between supply and demand. The premiums that properties are achieving are still high by historical standards but they are inching downwards, easing the pressure on those buying a home in Edinburgh and the Lothians.
"Moving forward we expect to see this pattern continue. The supply of homes to the market will continue to improve meaning that premiums will ease further and this in turn will bring house price inflation down to more sustainable levels. Earlier in the year ESPC was reporting annual house price inflation in Edinburgh of over 9% but more recently this figure has come down to around 4%.
"Uncertainty over Brexit continues to provide the greatest downside risk to the market but low interest rates and high employment levels will help to support house prices and, as we head towards the turn of the year we expect to see annual house price inflation in the region of 2-3%."
If you have a question about the property market or if you are thinking of buying or selling a property, get in touch with Warners today on 0131 667 0232 or by emailing us at email@example.com and one of our friendly, expert team will be delighted to help.