Interview by Cameron Stephen with Nick Hancock, Chartered Surveyor – all about Home Reports and the Edinburgh Property Market in September 2017
I have known Nick Hancock for many years and he is married to Pamela, one of my best and longest friends. Nick is a surveyor with DM Hall, based in Edinburgh and is our surveyor of choice when it comes to getting our clients their Home Report, when selling their properties in Edinburgh.
Cameron: 2017 has been a funny year from the Edinburgh Property market. Properties have been selling quickly and for prices well over their Home Report values.
Nick: That’s right, properties have been selling quickly and well, by and large because there is a shortage of properties coming on to the market, which is creating demand and competition.
Cameron: A noticeable decrease in numbers.
Nick: Yes, definitely. It varies from month to month but some months in 2017 have seen a significant decrease in the number of properties coming onto the market in Edinburgh, when compared to the past few years.
Cameron: Of course, solicitors, surveyors and estate agents all like to speculate on the reasons for this but do you have any thoughts?
Nick: It’s difficult to say for sure, but I think that there are a number of contributing factors for this. There are economic reasons – people are feeling uncertain about the economy, Brexit and a potential second Independence referendum; there is the increasing cost of moving; it appears that there is a trend towards staying in your home for longer and improving or extending rather than moving every two or three years to upgrade; and also it appears that there are people who would like to sell and buy a new property but who are put off selling because of the lack of suitable properties for them to buy.
Cameron: With the changes to LBTT (the Scottish Stamp Duty) it is certainly more expensive to buy the higher-end properties.
Nick: Yes and although that did seem to have an initial effect, the higher end of the market is now improving, with some agents reporting that the addition of LBTT is now being factored in as an unavoidable moving cost.
Cameron: And do you think that property prices will continue to rise or even do you think we are at the high point in the market? I have certainly noticed over the past month or so that there are fewer buyers viewing properties and offering at Closing Dates.
Nick: You would need a crystal ball to answer that, but I do think that once people feel more confident in the economic conditions we will see a return to the usual levels of properties coming onto the market for sale and that should mean more choice, less competition and a return to perhaps more properties selling at prices more in line with market value.
I do think also that since many properties are selling at closing dates, there can only be one successful offer and so those buyers not offering successfully are perhaps going on to increase their offers for the next property they find, and that too will have the effect of pushing up the prices achieved.
Cameron: Yes, I think you’re right. We started off the year advising clients that they would need to offer about 7% over the Home Report value to stand a reasonable chance of being successful at a Closing Date but now it is 10% or more and we have sold properties that have achieved way over 10% more than Home Report value.
It has been a slow time this Summer for new properties coming to the market and so far in September, we have not seen any significant rise in numbers in what is traditionally thought of as being one of the peak times to sell. Do you think there are still traditional peak times of the year for the property market or has it gone?
Nick: If you had asked me a couple of years ago, I would have said no – not since the Banking Crisis. But over the past year or so, I think more agents have been pushing the message that Spring and Autumn are good times to sell and their clients take their lead from the agents. So, in some respects the industry is re-establishing the tradition again itself.
Cameron: And what about the Buy-to-Let market. Do you think the Additional Dwelling Supplement and tax changes have put people off buying property as an investment?
Nick: As a matter of fact, if anything we are seeing an increase in the number of investors coming to the market. Property is still perceived as a good investment and rents are still going up. So I think investors are just factoring the additional costs in, and these are being offset by higher yields.
Cameron: Turning now to Home Reports, do you think that the Home Report system is working in Scotland?
Nick: Yes I think it does. One of the stated aims of introducing the Home Report was in order to improve the quality and condition of housing stock, and this is certainly being achieved as agents and sellers are far more aware about how the report will reflect the condition of a property in the eyes of a potential purchaser, and so the level of general maintenance has noticeably improved since their introduction.
Cameron: And now that difficult question. As you know, mortgage lenders only give a buyer a mortgage as a percentage of the Home Report value and not the price being paid. So, if I were to buy a property at £220,000 with a Home Report value of £200,000 and I was in competition with 6 other buyers at a Closing Date, why is the market value of that property not £220,000?
Nick: Because of the definition of Market Value. When you or Jayne go out to give a client an appraisal of their property, you will probably explain to the client that you think that the Home Report value (or current market value) will be X but that you would expect that the property is likely to sell for Y after proper marketing. We have to value the property on the date of inspection and on the assumption that marketing has already occurred.
Cameron: Even although marketing has not in fact happened?
Nick: Yes. In England, as it was in Scotland before the Home Report was introduced, the property is valued for mortgage purposes once an offer has been accepted – once the property has been marketed – and so it is possible that if you were to buy that property in England the valuation would come in at £220,000.
Cameron: And so what is the definition of Market Value?
Nick: Market Value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and without compulsion.
Cameron: And finally, what would you recommend people do, to be more prepared for when they get their Home Report?
Nick: I remember when Home Reports first came in that agents were constantly challenging surveyors when condition was given a category 2 comment, but nowadays the market seems to be much more educated about the repair categories. Generally, I find that most home owners are already aware of the defects we find, and so I would first advise them to caste a critical eye over their home and do some general maintenance. Things like cleaning out the gutters, replacing missing or broken slates and redoing the sealant around baths and showers are common areas which would receive a category 2, but these things don’t usually cost that much to repair. Also, if the owner is aware of defects and intends to carry out repairs before sale, it would be better if they did them before we inspect as we have to report the condition on the date of inspection, so a category 2 will still be a 2 even if we are told that they intended to carry out repairs.
Cameron: Nick, thank you.
Nick Hancock is a Chartered Surveyor withÂ DM Hall based in Edinburgh and can be contacted by sellers direct to instruct a Home Report.
For more information about Nick and the services provided by DM Hall why not go to their website: http://www.dmhall.co.uk/