Real Estate Expert says the influx of houses to the market is negatively impacting sales

Although it has taken a significant hit, the property market is still operating as of now, granted it remains in line with current government provisions. As such, the activities required to move house are permitted as well, so long as current safety guidance is followed as set forth by the Scottish government. Listed approved activities include those such as home appraisals, inspections, mortgage applications, viewing (barring open houses), offers, and home moves (including those across country borders).

The question remains, however: is the property market currently suitable for first-time homeowners?

The Head of Residential Property at Thorntons, Ken Thompson, has something to say about this. He believes it remains afloat and has created market conditions beneficial to sellers, but also cautions that first-time buyers are likely to pay inflated prices for quick-turnover properties, resulting in a loss of profit when they decide to sell.

In a recent public statement, Ken remarked: “We’ve witnessed an immediate and sustained mini-property boom since the market reopened in June 2020. There’s been such a pent-up demand fuelling the marketplace that in some areas has meant supply has struggled to meet demand.

“This has led to an increase in prices for all properties from small flats to top-end homes, which in some areas of Scotland, including Edinburgh and the Borders, have been significant. The year on year average price rise to the end of December was 6.8% in Dundee and Angus, 6.5% in Perth and 5.3% in Fife.

“Sales are only restricted by the number of homes coming to market but the demand from buyers has remained undiminished and first-time buyers have played a large part in driving the market.

“Part of this has been, in part, due to the availability of Government Assistance through the Help to Buy ISA scheme. This has now closed to new savers and has been replaced in part by the slightly less attractive Lifetime ISA scheme.

“The First Homes Fund, a shared equity scheme providing cash loans of up to £25,000 to assist in the purchase of a first home, has also proved hugely popular. This scheme was closed to applications in October but has now re-opened for applications to assist with purchases that will complete on or after 1st April 2021.

“Assistance may also still be available to new buyers under the LIFT Open Market Shared Equity Scheme. Funding is limited and is subject to maximum price thresholds that are fixed by reference to the number of rooms in the house being purchased, and the area within which it is being purchased – but it could provide a welcome boost.

“To gather more information on these schemes, and get assistance with applications, prospective buyers should speak to a Mortgage Adviser.”

“Another current incentive is the fact that Land & Buildings Transaction Tax (LBTT) is not payable where the purchase of a property is at a price of £250,000.00 or less. That currently leads to a saving for buyers of up to £2100.00 but that only applies to purchases that complete on or before 31st March 2021.”

Amidst these major concerns for first-time homeowners, the increasing prices stand at the forefront. These elevated prices could have dire consequences for home buyers as they cause required deposits to climb to unreasonable levels.

Ken later goes on to add: “There was a concern last year when some of the major mortgage lenders pulled their maximum lending back to 85% of the value of the property being purchased. Finding 15% of the value of the property plus the sum necessary to pay a premium overvaluation to secure a property means finding a significant sum.

“Fortunately, most lenders have reversed their policy and will now lend 90% – and in some cases more – plus mortgages are relatively cheap because interest rates are so low. Costs can be fixed by choosing fixed-rate products to protect against rising interest rates in the short to medium term.

“Ultimately, I believe there is never a bad time to get onto the property ladder but if there is a word of caution for first-time buyers, it is that that they do not pay an inflated price in a bullish market for a property that, as a first home, they may themselves be looking to sell again in three or four years’ time. But for sellers, this is a perfect time as you will be feeding demand.”