Will house prices rise over the next three months?
The RICS has released a report predicting that, according to their members, house prices in the UK are set to rise in the next 3 months due in part to the recent changes in stamp duty and a lack of houses coming on market, for sale.
The evidence from members of RICS may apply to the UK, but I wonder if the Aberdeen area will follow. Scotland can differ from the UK, and areas of Scotland can have their own particular factors affecting price. For many years now, Aberdeen has been a very distinct market, due to the strength of our local economy, mainly, but not exclusively, driven by the oil industry. It does not always follow that we will react in a similar way to UK predictions.
The factors which affect prices are various and change from time to time, but the most significant factor is confidence. If people feel confident about their job, the economy and their future they will undertake house purchase. Identifying and evaluating the factors in play at any particular time is a tricky task and this year there are some novel and unusual factors in play.
The first factor influencing the market is the change from Stamp Duty Land Tax to Land and Buildings Transaction Tax. Before the deadline, a greater number of higher value houses came on the market as people, thinking of moving, sought to beat the cut off. There was a concern that there might be an adverse effect on the housing market. ASPC’s sales figures show that over 80% of transactions in 2014 were below the point where LBTT takes more than SDLT.
The second factor coming into play is the decrease in the oil price and the effect it may have on the market. Our first quarter figures tend to alleviate that concern, but there is a small decrease in volume which may indicate how the market is going to go. Because the oil companies and their employees have been here before, there is some expectation that the oil price fluctuation and its consequences will be managed. If that is so, then there is reasonable optimism that the effect of the oil price will not be as significant as contemplated.
The third factor that has come into play, this year, is the general election. The indication from polls is that the result of the election may be too close to forecast, and such uncertainty may affect general confidence in the community until such time as we know how things are going to progress.
Taking the foregoing factors into account, it is not difficult to imagine that prices might drift a little lower in this area. However, the market for starter homes is still very active. Mortgages have never been so cheap and there is increasing competition to provide very attractive fixed term rates from the main lenders. Because of those factors it is likely that reasonably priced properties will still find a ready market. I am convinced that there is still demand out there for first time purchases and that this will filter up the market. The local market is poised - people are waiting to see the outcome of the election. We are waiting to see how quickly the oil price recovers. It will be an interesting time.