Wed, 10/30/2019 - 16:58
Edinburgh’s housing market, by its very nature, never stands still. As solicitor estate agents, one of our key jobs is to keep that market moving; we sell our clients’ existing homes and help them find their next one. In that endeavour, to put it simply, we want to secure people the best possible sale and purchase prices for their present and future homes and give them a personal service along the way.
Doing this takes experience, and the knowledge that derives from that experience. But buying and selling homes is not our only job. We also have to use that experience and knowledge to monitor the market, look for trends, and make sure that we can predict the impact of those trends for the benefit of our clients.
Trends are nothing new in the market. Anyone north of around 40 years old, who has been moving up the housing ladder throughout the current century, will have experienced a world of ‘offers over’ with no home report valuations; then managed the downturn, or standstill, depending on their postcode; then adapted to home reports and more prevalence of ‘fixed price’ or ‘offers around’; and more recently moved back to ‘offers over’ as the market regained some buoyancy.
But now, as we head into the third decade of this century, something new is happening. In the last couple of years, we have seen an increasing number of purchases being ‘subject to sale’, whereby a buyer places a condition on the purchase that they must sell their own property before the transaction can conclude.
‘Subject to sale’ purchases now comprise a significant minority of our transactions at Lindsays. In response we adopt tailored strategies in order to secure the best deal - whether for a buyer or a seller - by taking into account the likelihood of a problematic sale based on the property’s location, the selling agent, the asking price and so on.
In simple terms, the expansion of ‘subject to sale’ is happening because there is uncertainty in the market over the supply of houses. In this sellers’ market, sellers know they’ll sell, but some are unsure whether they’ll be able to buy what they want, so they simply sit out until the supply increases. This is, of course, a vicious circle, because fewer listings reduces the options for buyers by pushing supply down further.
It is most common amongst families and downsizers, who generally want to move but do not have to move and for whom a sale only works if there is also a purchase. Lack of supply of homes for sale is gumming up the market, particularly for second and third time buyers, and it is likely that the market will react to this one way or another.
At Lindsays we see the possibility of a new reality entering our lexicon - a sale ‘subject to purchase’. This would be a case of a seller - most obviously a downsizer or a family - listing their property and securing a sale conditional on them making a successful purchase.
In other words, the same people who are placing ‘subject to sale’ conditions on purchases could turn this dynamic on its head and sell their properties ‘subject to purchase’. They will inevitably be more relaxed about selling if they know that they have the safety net of being able to withdraw from the sale if they are unable to find a suitable property to buy.
If others behave in the same way, the vicious circle becomes a virtuous circle. This solution will not be for everyone, and we will still see plenty ‘subject to sale’ purchases, and both sales and purchases unlinked to another transaction.
But for this particular section of the market, stuck by a lack of supply, ‘subject to purchase’ could be the key to unlock the door.
An extract of the above article appeared in The Scotsman on Thursday 29 August 2019.