Partner and Head of Residential Property, Andrew Diamond explains why we should be cautious about predictions relating to the Scottish housing market during turbulent times.
So much has been said lately about how political events and rising interest rates might affect the housing market. But it’s important that we are clear about what those words represent at this stage: largely guesswork.
Yes, they will have an impact. That’s an undeniable fact. But predictions about the extent - no matter how well informed by experience - cannot be accurate, or even particularly useful, at this stage.
The truth is that it’s too early for anyone to say how rising interest rates will affect property prices and what that will mean for buying and selling your home.
To douse the flames of controversy a little, it’s important to put everything into context. Remember, interest rates are just one of many components in the market - and none work in isolation.
And while any rise means it becomes more expensive to borrow money, the cost of borrowing over the past decade has been historically low. In the medium term at least, it may be that we are returning to the norm rather than the exception.
There’s no avoiding the fact that this change has spooked mortgage lenders, who use prediction to inform how fixed-rate loans are priced. That spooking has led some products to be temporarily withdrawn, and others over-priced. But, as lenders gain a better understanding of what is likely to happen over the next two to five years, that should stabilise.
This is hardly the first ‘shock’ in the 30 years I’ve spent in this industry. Uncertainty will ease. The market will reset. Borrowers and lenders will readjust, and we will all move on. We might even then be able to make some truly informed predictions.
For all of the unknowns right now, there are, however, many knowns to take comfort in.
Firstly, money is still available. Liquidity is not an issue for lenders, just the pricing.
Secondly, buyer appetite remains strong, with high employment levels helping confidence.
Thirdly, most buyers are also sellers, and vice-versa. The market is always a case of swings and roundabouts for them. They make gains on the swings and losses on the roundabouts. What they are depends upon how the park is set up at the time.
While, for example, you might pay a higher rate of interest on your mortgage, it may be that you pay closer to the home report valuation than has been the case in recent times, meaning the amount you borrow is slightly less.
For those only selling, of course, that scenario is more challenging.
Remember too, that talking about “the housing market” is a sweeping generalisation. There are thousands of different markets across the country, each with their own dynamics. What’s true for Brechin might not be so for Biggar. What’s true for a flat may not be true for a house. That’s what makes tailored local professional advice so crucial.
The most sensible thing I can suggest right now is not to put too much stock into what the crystal ball gazers are predicting. History has taught us that fortune-tellers rarely get it right.
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