Shortage of homes pushing Scottish house prices up as demand pauses in January -RICS

The Scottish housing market saw a flatter demand trend but continued price growth during January, according to the latest RICS UK Residential Market Survey.

Against a backdrop of stable demand, housing supply continued to decline, with 21 percent more respondents reporting a fall in properties coming onto the market in Scotland.

Newly agreed sales across Scotland remained steady in January, however, sales are likely to rise in the short term, with 16 percent more chartered surveyors expecting an increase over the next three months. The picture across the UK is mixed but most areas have seen a rise in sales since the start of the year and further increases are anticipated.

Even with demand failing to rise, the continued lack of supply pushed prices up, with 29 per cent more surveyors reporting prices to have risen in January (typically the RICS indicator has a six month lead over ONS house price inflation). Looking ahead, house prices are projected rise further over the next three months, with 16 per cent more contributors expecting prices to increase rather than fall.

Sarah Speirs, Director RICS in Scotland, said: “Again we are seeing a failure of pick up in new properties coming onto the Scottish market and, although demand was not as strong this month, housing supply is still lagging behind. However, with buy to let investors rushing to get into the market ahead of the Land and Buildings Transaction Tax hike, the near term pressure on prices is intensifying.

“How the tax changes planned for the buy to let sector over the next few years play out remains to be seen but there are concerns raised in the survey that some existing landlords will look to either gradually scale back on their portfolios or exit the market altogether as the more penal regime begins to bite. Against this backdrop, it is perhaps not surprising that the key RICS indicators points to further rent (as well as house price) increases.”

In the lettings market, tenant demand in Scotland increased once more and all areas of the UK saw a rise in interest from perspective tenants during the three months to January. At the same time, landlord instructions were broadly flat. This extends a run in which supply has failed to keep pace with demand for the majority of the last few years. As a result, expectations point to continued rental growth in Scotland both at twelve month and five year time horizons.

Graham Toner MRICS, Graham & Sibbald, said: “It has been an unexpected slow start to the year for new properties coming onto the market. After an early slow-down in November it was anticipated that an early pick up would occur in January, although this has not yet materialised.”