House Prices in the year to May rose 3.5% to £143,000 in Scotland. These figures coincided with a report by PWC on the health of the UK housing market where Richard Snook, the PWC senior economist said: “The figures are in line with our expectations that growth in 2017 will be around half that of 2016. Our main scenario anticipates a softening of the market over the year with house price inflation falling from 7% in 2016 to 3.7% in 2017. We expect London to be one of the UK’s worst performing regions, achieving price growth of just 2.8% in 2017. The key drivers of this slowdown are uncertainty related to Brexit and a softening in the economic outlook.”
Following these comments and this report we asked our Brian Gilmour his thoughts;
Q This story has been in various papers portrayed as both positive and negative, what do you take from it?
With the number of house sales down over 40% than pre-2007 small changes can have a large impact on average house prices, specifically alterations to London to the London & south east average can have a large impact on UK averages. We had a dramatically over heated market pre-crash and more gradual price inflation could be looked at as a positive however the relationship between average prices and average earnings hasn’t overly changed and properties still stay out of reach of many. Price inflation is not necessarily a bad thing. Many people saw their house prices fall post crash and even now, 10 years later, inflation has only taken their homes to (at best) 2007 levels. House price inflation can make people feel better about their worth. Regardless of whether they are successfully paying down their mortgage or not people will feel better if the percentage of their outstanding mortgage is reducing.
Q What does this mean if you are buying or selling a house?
It doesn’t really mean anything – it’s a snapshot. It still shows similar marginal growth in line with the 9 years since the crash.
Q There is still growth though, do you think the market was generous before with the growth you can get?
We need to remember that one of the changes pre-2007 compared to today – the introduction of the home report. This means that values are set before the house enters the market, not after a campaign of marketing. It’s like driving looking in your rear view mirror and limits price inflation in Scotland. So whilst the economics surrounding the wider economy play the largest part in the Scottish house price performances the impact of Home Reports is sadly overlooked by most commentators.
Q Brexit is a factor for London house prices, but how much does it impact on Scotland?
The Scottish market is more affected by wider economic factors. We have a healthy part of our workforce in the public sector and the limit on wages impacts on the value of mortgages. The adoption of home reports with values set based only on previous sales and not market pressures keeps a lid on prices. Any Brexit impact is part of a wider economic impact on the Scottish economy.
Q Where do you think house prices are heading?
Where prices head will be determined by where the wider economy heads. Prices to double every 10 years but what we have seen is pretty much seen prices drop down and come back up to just the same level as where they were. If I knew for certain I’d be a millionaire but I’d suggest we’ll continue to see growth marginally above inflation for the next wee while.