Paul Hilton: Why today's current housing market bears little resemblance to 2009

Paul Hilton, CEO of ESPC, shares his thoughts on the current housing market in Edinburgh, the Lothians, Fife and the Borders as we've seen so far in 2023.

Despite many comparing the current housing market to the last great financial crisis in 2008/2009, we at ESPC feel that there is no real comparison to be made. In stark contrast to the situation for many homeowners and aspiring homeowners 15 years ago, we believe that there are actually many reasons to be positive about the current state of the Scottish housing market – although there are challenges, of course.

We’d like to debunk the myth that we are currently in a housing crisis akin to that of 2009, and reassure first-time buyers, homeowners, sellers and investors that there is much to be positive about.

ESPC’s latest data presents a broad spectrum of differences and similarities between the property market in 2023 and that of 2009, which was the worst-performing of the last 15 years. Back then, homes were selling for an average of £195,455, while 2023’s average selling price sits at £278,008 currently. Homes took 85 days to sell in 2009, compared to just 22 days today. Clearly, the situation is very different.

The biggest difference we see is that of the number of homes available for a fixed price – traditionally a method sellers opt for when they need a quicker sale, which we could assume to see more of if sellers are hoping to avoid a hike in their mortgages. In 2023 so far, 970 homes have been listed at a fixed price, but by comparison, in 2009, 3,631 homes used this method. In 2008, the figure sat at a staggering 9,639. So clearly, we are not in a position like the one seen back then – although many homeowners will have been negatively affected by the rise in mortgage rates, we are not seeing the catastrophic impact that was experienced by so many 15 years ago. In any case, a rise in homes available for a fixed price is good news for first-time buyers especially, who may not have to dig so deep to fund the dreaded ‘double deposit’ that comes with offering over the Home Report valuation.

We’re also seeing many differences in the mortgage market between now and then, which, despite the rising interest rates and the impact this is having on many, means that things are much better overall. While there was a credit crunch and a subsequent lack of lending in 2009, today there are 100% mortgages available from selected lenders, which allows first-time buyers a much easier route to access the market, while the introduction of the UK Government’s mortgages charter means that we are unlikely to reach the crisis point of mass repossessions that we saw in 2009. More responsible lending and stress-testing of mortgages means that things are very different from the past, and while it is by no means an easy time for homeowners who have seen their repayments rise by hundreds each month, there may be some (even limited) consolation to be had in that we have seen worse.

There has been much said about the drop in property sales across Edinburgh, the Lothians, Fife and the Borders, but examining the data available, we are seeing a cooling of the market following on from some of the most intensive years in recent history, taking things to more ‘normal’ levels of activity, as was recorded between 2016-2019 where we saw more consistent figures.  

Alongside this, there are more recent developments which have certainly impacted on the market, mostly caused by economic uncertainty. Some first-time buyers have changed their plans to buy – recent research ESPC conducted suggests two in five buyers have been affected by changes to mortgage rates amid the cost of living crisis, with some reporting they have delayed their plans to buy, or have changed the type or location of property they were hoping to purchase, while some sellers have opted for a ‘wait-and-see’ approach before committing to a sale. Arguably, we are seeing more listings, with the gap between this year and last year closing; perhaps more sellers are encouraged by the activity in the market, and feel more reassured that they will be able to make a move to a new home.

Meanwhile, some landlords have paused their buy-to-let plans, which further impacts the difficult state of the current rental sector. With the rent caps, no-eviction legislation and a rise in the Additional Dwelling Supplement, perhaps many are looking at England as a better investment, where there are no rent caps, and the Additional Dwelling Supplement costs half of its Scottish equivalent.

The effects of other Government legislation, particularly in the rental sector, could be attributed to the figures we’re seeing in the property market too. Edinburgh has the highest rate of rent inflation in the UK, meaning that renting in the Capital is becoming unaffordable for many (especially for aspiring homeowners who need to save a deposit while paying their rent). As such, buying still appears an attractive option to many – especially when you factor in the limited number of properties available to rent in the city.

While inflation and mortgage rates have been at the forefront of discussions around the housing market for almost a year now, there are arguments that inflation has now peaked. This may well mean that the worst is now behind us, and things will gradually begin to improve – welcome news for first-time buyers, homeowners, and investors alike.  

In summary, we’d like to put to bed the conversation that 2023 is heading the same way as 2009. While things have been harder for many, and while the frenzy of the immediate post-pandemic years has calmed substantially, the Scottish housing market is still performing well, and buying property, whilst not necessarily an easy thing for many, remains an aspiration that can be achieved.