The West End market in 2017 has been characterised by strong demand across most (but not all) property types leading to quick sales, an increase in closing dates and offers sometimes 10-15% above Home Report valuation.
Many clients ask us what has prompted the level of competition for prime property and the subsequent uplift in prices. There are several reasons, but clearly the main driver is simply supply and demand. As astute market watchers will know, a relative shortage of property coming up for sale has been a growing feature of the property market across the UK and the West End is not immune to that trend.
At the same time, demand has been driven by, among other things, astonishingly cheap mortgages. Yorkshire Bank, for example, has been offering a fixed term mortgage at 0.89% if you can muster the 35 % deposit required.
Where that combination of scarce opportunities and multiple buyers occurs, it creates competition and experience shows that some buyers will go above and beyond the Home Report value to secure the right property. We have noted several offers at closing dates reach in excess of 10-15% over home report value and even then, it was a close run thing.
This is not true for all properties, however.
The impact of the Land & Building Transaction Tax on the upper end of the market continues to be felt. Indeed, some buyers have been very clear that they have revised their budgets in the light of the higher tax rates applied to more valuable properties and what potentially would have been a maximum budget of around £450,000 has been cut to £400,000 or so to take the higher tax rates in to account.
The Additional Dwelling Supplement (ADS) tax which adds an extra 3% of the purchase price if the buyer already owns a property is also having an effect. Buy to let landlords have most certainly felt the pinch here, although high rental yields have offset that initial outlay to a degree. The tax is, of course, repayable if you are simply selling your existing property to move to another one – provided you sell your original property within 18 months. But for anyone with a holiday property and for couples moving to a new home who have decided to retain a property one or the other already owns, it adds to the purchase price.
Young professionals seem to be the hungriest buyers and, provided they have mortgage finance in place, they are ready to act decisively. If they are thwarted in one purchase, they are likely to make a more generous offer on a subsequent property.
They are, however, often in competition with parents of students attending on of Glasgow’s universities who see property purchase as a more profitable use of their savings than leaving them in the bank. As you would expect, both of these groups are looking principally for flats and we have seen extremely high activity in this sector of the market. One area of the West End to benefit greatly from this is around Kelvingrove Park and into Finnieston given the gentrification of the area. A slight echo of Byres Road 20-30 years ago perhaps.
Houses in the west end are rarer which intensifies competition among buyers. Areas such as Kelvindale and parts of Broomhill are experiencing price growth driven by strong demand. Not every buyer can be successful, however, and we now see buyers looking further afield for a house with its own garden and a driveway.
Of course, if you are thinking of moving now is a great time to put your home on the market. Although we are now in the summer months which are traditionally associated with a slow-down in activity, the current dynamic suggests that the market will hardly miss a beat over the summer holidays. Successful sellers also have the advantage that their offers are likely to be favoured when they come to buy because they are ready to act quickly.
For buyers, the key is to be ready and to act quickly. Get your lawyer and your mortgage in place early. If you have to sell in order to buy, get your home on the market. And if you want an insight in to the market, Pacitti Jones is always happy to help.