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Published: 16 January 2023

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THE KELVIN VALLEY MARKET OUTLOOK FOR 2023

Put simply, 2022 was a rollercoaster year for the property market! Never in such a short space of time have we witnessed quite so many strange things happening with politics, legislation changes, significant financial policy changes (which were then changed back) – there really was all sorts of weird and sometimes not very wonderful things going on! If there was one phrase that is perhaps the most accurate, it would be to say that 2022 was a ‘year of two halves’.

The first half of the year witnessed a very buoyant property market with pretty much every property selling above home report value and some selling substantially over home report! It was during the busy Spring market in May that our Sales Team recorded their highest ever sale in the area at £120,000 over home report (and no that is not a typo, that is one hundred and twenty thousand pounds above the home report value in the local area!)

We were experiencing incredibly high levels of interest from buyers, and it was not unusual to be receiving between 10-15 offers per property at closing date and for those offers to be substantially above home report value. Detached houses in particular were in high demand throughout the area as people craved more indoor and outdoor space, and we saw many people moving out of city centres out to towns like Kilsyth, Cumbernauld, Kirkintilloch and the surrounding villages. Any property that was semi-rural was being snapped up by people desperate to move to the countryside, in search of a better lifestyle. Offers ranging from £30k - £60k above home report were becoming the norm on detached properties in the areas in which we were selling.

Meantime, the rental market continued to gather pace with rental demand getting higher and higher as the year progressed, and by the time we hit the summer months we were receiving over 100+ applications for every property we marketed. Inflation was now reported to be running into double digits and everyone’s costs were rising sharply, and we also witnessed a large jump in rents in the area. A series of crazy housing policy changes introduced by the Scottish Government were leading to far fewer rental properties being available, as many landlords sold their properties 2022.

By the time we reached the end of the summer, media coverage was gathering pace that inflation was running far to high and one of the primary ways to combat it was going to be some rather sharp interest rate increases. The Bank of England base rate had been artificially low for over a decade now, and it was always going to be the case that it would start rising. The amount of negative media reports about the UK economy, the national debt, how high inflation was, and how the property market would be negatively affected, all caused the market to slow down coming out of the summer months and into the Autumn ones. Although properties were still selling, we noticed that the number of viewings and level of offers were starting to drop. We were achieving good prices for clients on their sales, but not to anywhere like the level we had been achieving in the first half of the year. Although we could see the market naturally starting to slow and settle more towards more ‘normal’ market conditions, nobody was quite prepared for what happened next!

On the 23rd September following a change of Prime Minister, a UK ‘Growth Plan’ was put forward (now infamously known as the ‘mini-budget’). Nobody could have realised quite what a disastrous effect this would have on the financial markets, but there was sudden panic. The UK was quickly downgraded to being far less credit worthy on the international money markets. The mini-budget caused a series of events that shocked the economy and the property market. The bottom line is that the majority of analysts and experts could only forsee that it was going to plunge the UK into more debt and cause many more problems than it solved.

On the 17th October less than a month later, the vast majority of the mini-budget was reversed, and only a week after that we had a new Prime Minister, however the damage had already been done! The Bank of England started raising interest rates sharply, and the UK mortgage lenders had been so panicked that in the space of a few days in September mortgage rates went from around the 3% mark to over 6% - put simply, it went from being very affordable to get a mortgage to suddenly being very expensive, almost overnight!

All of these things of course negatively impacted the wider economy and people simply stopped spending money. People that had been lining up to buy houses and make offers were having second thoughts and, in some cases, could no longer afford to move anyway, based on the new mortgage rates! This was a worrying time for people who currently had property sales going through and mortgage applications that were in progress. We had many buyers and sellers who were very worried as to whether their transactions would actually settle. Our Sales Team were involved in one chain of sales that had eight properties in it, and we had to spend a lot of time speaking to clients, solicitors and mortgage brokers to try and keep everything moving in the right direction!

Transactions that should have been straightforward and taken 5 or 6 weeks to go through were now suddenly taking 10-12 weeks and people were getting very stressed. We even heard cases of mortgage lenders withdrawing offers that they had already made to people, although thankfully that didn’t happen to any of our clients!

By November, the dust had settled and many lenders were slowly starting to release more affordable mortgage products again and we even got back down to deals in the 4 – 4.5% range. Whilst this wasn’t as good as the 3% people were getting in the summer, it was still a lot better than the 6% people were being quoted in September. All of the negativity in the market however and the shock that the mini-budget and doubling of mortgage rates caused, did have a clear knock-on effect onto the general market conditions and we found November and December a lot slower with far few properties coming to the market and far few buyers looking for them when they did. Seasonally of course, November and December are traditionally quieter months for the property market anyway so a combination of factors really put the brakes on the market as 2023 drew to a close.

One of the frustrating things, is that the property market was already starting to cool coming off the summer months anyway and did not need any drastic intervention. The mistakes made over the mini-budget just caused the market to slow much faster than it should have, and a lot of unnecessary panic for people that did not need to happen.

However, what has been interesting moving from the end of 2022 and into a New Year, is the large amount of people now talking about moving in 2023 and requesting valuations or being added to our buyer database. At the close of every year we systematically work through our buyer database. With everything that happened in the final few months of the year we expected a lot of buyers to be unregistering or advising us that they were putting off their plans to move house, however that has not been the case. In fact, our database of registered buyers has actually been growing which gives an early indication that whilst people have perhaps hit the ‘pause’ button in the 2nd half of 2022, that they are very much now going to be actively looking for a new home in 2023.

Since the turn of the year, there has been a lot of evidence that the property market is now returning to more ‘normal’ market conditions (i.e. like what we had in 2018 / 2019 pre-covid). In our first week back after New Year, we sold four more properties, two of which had been on the market for over a month and had been struggling for interest in December. Of the four properties we sold in the first week back, two sold right on the home report value, and the other two sold above the home report by a few thousand pounds, but certainly not by tens of thousands.

It looks likely that this will be the pattern that the market starts to now fall into, where properties sell much closer to home report value and buyers will not be prepared (or unable) to pay tens of thousands over. We are not seeing properties selling below home report, and demand in local postcode areas remains strong, but we may start to see some sales below home report in the lower end of the market now that landlords are being taxed an exorbitant 6% on any buy to let purchases. Several of the housing policy changes in Scotland in 2022 have been very anti-landlord, which then of course has a knock on effect in the lower price ranges where lots of properties would have traditionally been sold to landlords. Landlords now have to reflect the new 6% ADS tax into any offers they make, and as usual it is the ‘end user’ that is most affected, whether that be a seller who is now receiving less for their property or a tenant who is having to pay a much higher rent to help cover landlord’s increased costs. Here at Kelvin Valley, we believe that the bottom end (sub-£125k) and the top end (above £400k) of the local market that will be the most adversely impacted in 2023 by everything that has happened in recent months. We still expect to see very good levels of demand across the rest of the market between £125k - £400k where the vast majority of buyers are and where there are simply not enough family homes in the area to go around.

We have seen all sorts of reports about how the property market is going to perform in 2023, right from the doom and gloom reports about values dropping 10%, through to the optimistic reports that values with rise a further 5-7% in the year ahead. We are reminded that at the start of 2022, most so-called experts predicted a post-covid crash of up to 10% for the year just past, and a very challenging year for the property market. They got it completely wrong, and instead we saw property values in fact rise by a further 10% in most local postcode areas. Many ‘experts’ were as much as 20% out with their predictions!

We still remember the poor souls who told us at the start of covid in the Spring of 2020 that they were going to hold off for the ‘imminent crash’ before buying. They then had to watch values going up by 25% - 30% over the next 2.5 years as they were totally priced out of the market. The problem with watching too much news or trying to wade through conflicting media advice, is that often the so-called experts can be completely wrong. Over the years we have learned that procrastination steals opportunity, and whilst it is wise to do your research, you can end up priced out of the market or costing yourselves tens of thousands more by waiting to long.

The bottom line in central Scotland, is that we still have a huge shortage of available housing stock and this was exacerbated by covid. There are simply not enough properties to go around. Whilst there remain more people buying than selling, then prices will continue to go up. If the number of people buying and the number of people selling starts to balance out, then values will start to stay at the same levels neither going up nor down. For property values to fall, there would need to be a glut of properties on the market not selling and a dramatic fall in the number of people buying for that to happen. There are no signs of that at the moment, so unless there is a major swing both in terms of supply and demand, it is unlikely that we are going to suddenly see a property price ‘crash’ in the year ahead.

What we more realistically are likely to see, is buyers being more cautious and carefully budgeting, which will lead to offers being made in and around home report levels on most properties. Homes that are popular and end up having closing dates with multiple offers will still continue to sell above home report value, but it is our believe that many more properties will sell around the home report value in 2023.

In some ways, this does make the market a more level playing field, and buyers and sellers have much better ideas on what they need to offer when buying, and what to expect for their properties when selling. Whilst you may no longer receive that fantastic £50k over home report offer when selling in 2023, you also won’t then need to sink that same £50k (or more) straight back into the property you are buying either! The end result is that many people can end up with smaller mortgages and less ‘dead money’ tied up in properties all because they paid well above the actual value and that money is now gone and can’t be considered equity.

Whilst we don’t expect property values to drop or suddenly start selling tens of thousands below home report, we do expect the rate of growth to slow right down this year, perhaps to somewhere in the region of 1-3% growth and below the current level of inflation.

However, it is worth remembering that we have just had 3 years of significant price increases, so this ‘settling down’ of the market was something that was always going to happen, and in some ways we are surprised that the rapid growth phase of the market lasted as long as three full years. Even if property prices were to fall 5% in 2023, the fact that they rose 30% between 2020 – 2022 means that they would still be up by 25% in 4 years (instead of up 30% in 3 years).

The medium to long term outlook for the property market remains strong, primarily because there are simply not enough properties to go around and nationally we are way short of the housing stock we should have for the size of population (especially in the central belt where the most employment opportunities are).

We hope you have found this market summary from 2022 and outlook for the New Year useful, and hopefully it has provided you with plenty of information on how the market has been and what is expected in the next 12 months.

Whether buying or selling, our Sales Team can provide accurate and up to date information and will be more than happy to assist.

0800 133 7775

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www.kvps.co.uk