Maurice Allan, Managing Director of our Residential Property team, appeared in an Insider article on Friday 3 March commenting on the current market and prospects for buyers and sellers.
He believes fewer will need to rely as heavily on parents for large deposits as homes sell closer to valuation, with positive ripples along the whole housing chain which both buyers and sellers can seize.
While interest rates are higher than in recent years, Maurice says this should not put people off taking a step onto - or their next step up - the property ladder. With properties in Edinburgh and the Lothians now selling closer to their home report value than previously, this means the costs are balancing out.
Maurice said: “While people are paying more to borrow money, they are paying less for their next home.
“Most buyers are also sellers. When the trend was for significant offers over valuation, that created an uncertainty for some who were confident of selling their current home but unsure about whether they could afford their next.
“In some areas of Edinburgh, it hasn’t been uncommon for people to pay upwards of 10% above valuation in the past couple of years. Currently, while every purchase is different, that premium is likely to be more modest.
“That creates a more balanced market, and we should start to see that fear factor ease. People can look at their next purchase with a bit more confidence in terms of how they might make an offer.”
For first-time buyers, this means they are not having to find as much of their own money to fund an offer over the home report valuation, as has been the case in recent years.
Maurice added: “Although your repayment interest rate may be, say, 5% instead of 2.5%, you’re probably borrowing less overall and you no longer need to find the same amount of cash to fund a purchase in excess of the home report valuation.
“It’s that premium that first-time buyers struggle to find. They may be borrowing 90% of the valuation, but anything they pay above that figure they have to find themselves.
“That’s often where you have parents stepping into top things up. The decline in the number of offers over may reduce some of the pressure on them.”
While interest rates have risen since last year’s mini budget by former prime minister Liz Truss and chancellor Kwasi Kwarteng, the first mortgage deals under 4% interest have started to return to the market.
In the latest UK House Price Index statistics for Scotland, the average price of a home in Edinburgh increased by 5.9% year-on-year during November to £334,113. That compared to a Scottish average property price of £191,492 - a 5.5% increase on the year. The monthly average price change of a property across Scotland was -1.2%.
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