News of a rise in residential property sales got some pretty positive coverage yesterday – as well it might. The chances are that there will be more good news to come on that front. But it’s important not to jump to the conclusion that everyone, everywhere is seeing an improvement in market conditions.
The headlines yesterday focussed on the big news about the rise in sales, but there are four important points that did not make the headlines in every paper:
- Not everywhere saw an improvement
- Not every property type saw an increase in sales
- Sales generally remain well below their ten year average
- Prices remain lower than they were a year ago
Sales set for stronger growth
First, the good news; the recent increase in sales reported by the Registers of Scotland is likely to continue for some time. Why do I say that? Because GSPC tends to see trends emerging sooner than RoS does. We record a sale when advertising ceases. Registers records a sale when ownership is transferred, some time later. Looking at the number of sales reported by GSPC members, there has been a steady improvement in sales as the year progresses. That is likely to be reflected in the next quarterly report from RoS.
Looking at the figures in more detail, however, shows that the recovery in the market implied by higher sales is not evenly spread. By the way, if you want to review the data from Registers of Scotland for yourself, you can find it here
1. It depends on where you live
Although some areas saw steep increases in sales – transactions in East Renfrewshire leapt 23.5% on the same time last years – sales in Inverclyde, East Ayrshire, North Lanarkshire and West Lothian were all lower than they were a year ago (see graph).
It’s a perfect example of why average figures for the property market in Scotland can’t be applied to specific areas, towns or even individual houses. Sales overall may be better, but that doesn’t necessarily mean that the market in your area is following the national trend.
2. It depends on what sort of home you live in
It’s also the case that not every type of property experienced the same increase in activity. Sales of flats were up by a huge 16.5% and semi-detached homes saw an increase in transactions of over 8%, but sales of detached houses only rose by 2.5% and sales of terraced houses hardly changed at all.
In other words, even in an area experiencing an overall increase in activity, not every property will be affected in the same way.
3. Sales remain low.
Even with an increase in sales, transactions remain well below their ten year average. In this case, the average (from 2003 to 2012) straddles the recession and so includes some years when activity was particularly buoyant and some when activity was depressed. On that measure, sales in most areas are still around a third below normal (again, see graph).
If you exclude the exceptional period immediately after the credit crunch, sales are even lower relative to their average level. In Glasgow, for example, sales between April and June peaked at 4,962 in 2007. That is over double the 2,161 sales recorded this year.
4. Prices are no higher than they were
There is an expectation that higher sales must mean higher price and, indeed, the Registers of Scotland reported that prices rose 3.3% in the three months between April and June this year. But RoS also reported that prices fell by -4.3% in the previous three months. So, the recent rise in prices has not fully offset an earlier fall and they remain a little lower than they were this time last year.
Again, an average figure for the country as a whole disguises significant variations depending on area and property type. Detached houses seem to have struggled most while flats and semi-detached houses have done best.
In terms of location, even neighbouring areas are seeing different results. For example, prices fell slightly in South Ayrshire but rose in North Ayrshire.
The point to take from all of this is that, while reports on market conditions are interesting as an economic indicator, they are a useless and potentially misleading guide to what is happening to the value or appeal of your home.