The Scottish Government has announced that restrictions on housing moves in Scotland will lift on June 29 as the country enters phase two of its routemap for exiting lockdown.
Scottish estate agents are preparing for a surge of activity after 14 weeks of suspended sales.
The pandemic has brought huge new demand from buyers who want to relocate to Scotland from the south of England – but agents expect the boom to be short-lived.
Cameron Ewer of Savills estate agents, said that in May, the number of London-based buyers registering to purchase in Scotland jumped by 70pc compared to the first three months of the year.
In the last week, the number of new buyers signing up with Savills was 8pc up on the average for the first eight weeks of 2020, said Mr Ewer. “And we haven’t even opened the market yet.”
Estate agent offices will remain closed until Scotland enters phase three of lockdown in August.
The wave of demand
Overall, in the first week of June, buyer demand (measured by the number of inquiries on homes) for Scottish property had recovered to 86.7pc of the level it was at the end of February, according to property portal Zoopla.
By contrast, in the week before the market reopened south of the border, buyer demand in England stood at just 59.7pc of the February benchmark. This suggests that Scotland’s market could outperform its neighbour, which has also recorded a boom in activity since the market reopened on May 13.
Edward Douglas-Home, of estate agency Knight Frank, said: “We have 600 viewings to arrange as soon as lockdown lifts.”
Kevin Maley of Strutt & Parker added: “The first few weeks will be chaotic.”
The new buyers want to move for bigger gardens and more outdoor space, and are also looking for good value, said Mr Ewer. “One of the attractions of Scotland has always been affordability.”
Sellers are preparing to take advantage of this potential wave of money from London. There are signs that more expensive properties are being put on the market first. In the week to June 14, the number of listings in Edinburgh was 77pc down on the same week in 2019, according to Rightmove, while the value of those listings was only 62pc down.
A momentary boom?
But analysts are quick to warn that any initial surge will only be temporary. Dr John Boyle, of Rettie estate agents, said the surge will likely be unsustainable. Rising unemployment, particularly as the furlough scheme winds down in the autumn, could hit the market hard, he said.
Rettie has forecast that property transactions in Scotland will fall this year by between 20 and 35pc. It has also pencilled in price falls of between 1pc and 5pc.
Different pictures across Scotland
The forecast for the country is varied. In Aberdeen, the outlook is worse, said Dr Boyle. Property prices here are closely tied to the oil industry and house prices were still recovering from the last oil price crash in 2014. Back then, when the price of oil dropped to about $60 per barrel, home values dropped by almost 20pc, said Dr Boyle. Now, they are at about $40 per barrel.
Prices of small flats in Edinburgh are also more vulnerable, said Mr Douglas-Home. The city has a relatively high concentration of properties that are let out via short-term sites such as Airbnb. Smaller, city-centre flats “could flood the market and dampen prices,” he said.
Meanwhile, demand for large country houses is high. “There is potential for rural Scotland to have more appeal than it has ever had before,” said Mr Douglas-Home.
Practicalities will limit the surge
The Scottish market has two disadvantages for English buyers that could work against it.
First, even in phase two of Scotland’s lockdown, some travel is still restricted and hotels are not yet reopening. It will be some time before English buyers will be able to visit properties en masse, said Mr Ewer. “I don’t think the inquiry numbers will convert into massive amounts of transactions,” he added.
Second, Scotland’s housing market freeze has so far lasted a month longer than England’s and the prolonged period will also take a toll. The number of agreed sales in Scotland on June 7 was just 23.8pc of the level seen at the beginning of March, according to Zoopla. In Wales, where the property market has also remained shut, agreed sales now sit at 28.2pc of the pre-lockdown level.
“When you are in a trough for longer, it is harder to get out of,” said Dr Boyle. “But if lockdown lifts this week, we will still be able to capture a summer of activity.”
When the initial boom ends, even the top end of the market could also be constrained by banks becoming ultra-risk averse on lending, said Dr Boyle.
Most lenders have withdrawn low deposit mortgages from the market due to the uncertainty, which means that many first-timers are cut out of the market completely. “First-time buyers are the lifeblood of the market,” said Dr Boyle. “They are the start of the chain, so if they don’t buy, a downsizer can’t sell to a third-stepper.”