Rettie forecasts 15% dip in Scottish housing sales
Characterised as “more complicated and expensive”, Scotland’s housing market is predicted to see sales decrease by around 15% over the year and average house prices expected to drop by 5%, according to Rettie & Co.’s Summer Briefing Report.
The property firm, headquartered in Edinburgh, forecasts a complex year ahead for the Scottish housing market, driven primarily by climbing interest and mortgage rates.
In the first five months of 2023, the report showed a 10% fall in Scottish housing sales compared to the previous year. This trend is expected to steepen as the Bank of England’s decision to increase base rates to 5% in order to curb inflation takes effect. The escalating costs of mortgages are now outpacing average rents, posing significant challenges to the housing market, particularly first-time buyers.
Although the market is slowing, there is still a robust appetite for selling properties, as evidenced by the steady value of listings compared to last year. However, transactions are expected to be more prolonged due to the market’s deceleration.
Dr John Boyle, Rettie & Co’s director of research and strategy said: “When you add rising interest and mortgage rates to slower or negative house price growth, the picture is far from rosy for households in Scotland. However, the market is continuing to function even if at a slower pace.”
The average cost of a mortgage on a Scottish property is now higher than the average rent. A period of slower or negative house price growth, with material and labour costs remaining high, will slow down housing delivery, likely leading to subdued new build activity.
Dr Boyle added: “The reduction in supply combined with increased demand, set against an unhelpful legislative environment, is seeing a steep rise in advertised rents and a lack of availability.”
With new legislation in the pipeline, there is likely to be a further reduction in supply, at a time of increasing demand, as landlords continue to leave the sector and new investors are deterred.
Rettie & Co. also highlighted a disparity in supply trends across different Scottish cities. Edinburgh has seen a 10% increase in new property listings over the last three months compared to the same period last year, while Glasgow has experienced a 14% fall due to a downturn in registered sales.