The Winter Property Market; Demand Falls and Prices Rise

According to the October Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS), demand for residential property in Scotland fell for the sixth month in a row, with a net balance of -45% of survey respondents reporting a fall in demand from new buyers. A net balance of -48% of surveyors reported that newly agreed sales fell in October.

In addition, a net balance of +36% of surveyors in Scotland reported that residential property prices went up in the three months from August to October.

There has been a fall in the number of people looking for a new home or investment property, and agreed-on sales, despite prices rising.

Supply and demand

There was less supply of properties on the market in the last month, with -43% of Scottish surveyors stating that new instructions fell; indicating that there is less stock available to new buyers. This could be the reason that prices are reported to be rising.

This easing of demand and supply has resulted in most surveyors expecting sales to fall in the next quarter.

In terms of property lettings, demand from tenants in Scotland is rising, with surveyors believing there was an increase in October. Landlord instructions fell, and this is expected to result in rents going up in the short term.

Demand in the property market will be impacted by increasing mortgage rates – with a period of instability ahead with challenging market conditions, withdrawn mortgage products and higher interest rates.

RICS’ chief economist Simon Rubinsohn commented: “The latest feedback to the RICS survey provides further evidence of buyer caution in the face of the sharp rise in mortgage costs – as a result, the volume of activity is likely to slip back over the coming months, and realistic pricing is now much more critical to complete a sale.

“The settling down in financial markets could provide some relief, although it may be premature to assume this will be reflected in a reduction in lending rates anytime soon. However, the employment picture remains critical to the medium-term outlook, and for the time being, that remains solid.

“As far as the lettings market is concerned, the imbalance between demand and supply still appears unusually extended, leading to rent expectations in the survey remaining elevated. It isn’t easy to see this changing anytime soon in the current environment. “