Ignore the doomsayers. The Scottish residential property market fundamentals remain strong
By Eric Curran
The last thing anybody needs at the moment is someone else banging on about fake news but if you were a house seller in Scotland at the moment listening to the mainstream media you would be reaching for the pill bottle.
A combination of instinctive sensationalism, clickbait headline generation and what appears to be a fundamental lack of knowledge about how markets work has produced a stream of stories of late which suggest that the housing market is doomed and prices are falling through the floor.
This is quite simply nonsense and not supported by housing market stakeholders sentiment.
When the current crisis began to envelop us in March this year, I wrote that, because the mechanics of the Scottish residential market and its underlying strengths were not altered, there was no reason for it not to carry on as usual when the upturn comes. As it will.
Of course, activity has essentially ceased since March, but we are rapidly approaching the second stage of Holyrood’s lockdown-easing review process and the smart money is on the property market lining up at the starting gate for June 18.
One of the main reasons that I remain firmly optimistic is that strong anecdotal evidence from agents tells of hundreds of viewers waiting for the opportunity to see homes and even of bids being made on the strength of virtual viewings.
There are also credible stories of deals which have fallen through early in the crisis, when the air was thick with panic, which have since successfully re-marketed and sold for more than the original bid price.
There is no doubt that there is still a powerful pent-up demand to see houses, allied to a continuing lack of supply. So, stories of the inevitability of dramatic house price falls simply do not compute. They defy the basic laws of economics.
That is not to say that variables will not come into play as the year progresses. The Coronavirus Job Retention Scheme presently is masking the possibility of substantial redundancies which, if significant enough, could have the effect of dampening demand.
But here is another anomaly.
Consider the huge numbers of individuals who have been furloughed or are working from home. They are not spending money on travelling to work, or coffees, snacks and lunches; they may have taken mortgage and insurance payment holidays; they are not going to the pub, cinemas, theatres or football; they certainly are not going on holiday.
As a consequence, they are better off in cash terms than they have been for some time.
The same situation applies to lenders. Because there has been no activity for three months, they are awash with cash and are desperate to get their reserves back into productive use rather than languishing in low and even negative interest-rate isolation.
Inexorably, they are moving back towards more traditional lending models, with deals on offer creeping back up to 85%, 90% and even 95% loan-to-value. They have no incentive to keep their money in the bank.
Another brake on the sector has been the fact that, in Scotland, it is not possible to market a property without a Home Report, which requires a visit from a surveyor. And even were visits allowed, many people may be reluctant to have outsiders in the house.
The profession has not been idle, though, during this period and has laid out well-structured plans for a rapid return to home visits, including PPE, social distancing, having homeowners leave doors and hatches open and conducting conversations outside.
Surveyors will take every step to wrap a protective blanket round their clients and prioritise their health and wellbeing, and they are willing and eager to get back to business if the gun fires on June 18.
DM Hall stands ready to bring back a phased return of surveying, backed by support teams, to serve its client base as soon as it is allowed to. The firm anticipates strong initial demand and then the likely prospect of having to rapidly scale up operations over the rest of the year.
As mentioned earlier, no one is going on holiday anytime soon, so normal low-demand periods may well be smoothed out and even rise to levels usually seen in the rest of the year.
The property market is much closer to a V-shaped recovery than I thought even in March. So, I say to people thinking of selling or buying a house: don’t listen to the doomsayers. The Scottish market is in fine fettle and ready to go.
Eric Curran is managing partner of DM Hall Chartered Surveyors, based in the firm’s Glasgow North office.