ACCORDING to a famed Wall Street proverb, it was Baron Rothschild who said more than 130 years ago, in 1871, ‘the best time to buy is when there is blood in the streets.’ Looking back at the vagaries of the residential property market in Scotland as the year draws to a close, this seems a fitting maxim for what can only be described as a tumultuous 12 months.

The market began the year at its lowest ebb for 18 years. Across the country prices had fallen 15%-20% from May 2008. However, despite some of the most troubling economic conditions worldwide since the Great Depression, and in an environment battered by the lack of availability of mortgage credit and a fear – to an extent fuelled by the press – of prices depreciating further, buyers (perhaps mindful of Baron Rothschild) continued to invest in the tangible safety of bricks and mortar.

By early February, figures from the first few weeks’ trading of the New Year showed a significant easing in the rate of decline in house prices across Scotland compared to the last three months of 2008. On the ground Rettie & Co experienced a 68% rise in the number of buyers registering, compared to January 2008, while the number of viewings arranged increased by 62%. These were extraordinary – and unexpected – statistics. This quiet determination by buyers and investors to carry on regardless took many in the Scottish residential property market by surprise.

Satisfyingly, as far back as February, Rettie & Co was looking towards an expected market recovery and confidently predicting ‘property prices in Scotland could end the year where they started.’ And why? Rental yields were clearly hardening, due to falling house prices, but resilient rents and attractive exchange rates offered hugely decreased property prices to ex-pats and overseas investors. It is no exaggeration to say that the combination of the softening of both capital values and sterling meant that for some overseas buyers Scottish property was literally half the price in early 2009 that it had been in early 2008. By March the fall in property prices had halted and activity revived incrementally from May, a trend which accelerated from June when the revival in transactions became dramatic. Astonishingly, there was unparalleled summer activity as sales figures continued to underline the housing market’s slow and sustained improvement North of the Border.

Rettie & Co recorded 67 sales at a collective worth of approximately £40 million over July and August, ensuring the best two summer months for sales in its 16 year history. With 63 sales in September totalling a further £36 million across Scotland, this activity continued into the Autumn as this article goes to press. The swaggering cash buyer touting for a discount no longer has the monopoly of the market. Our own experience suggests that around 15% of recent transactions are by determined buyers prepared to commit to onward purchases – albeit with long entry dates to mitigate risk – before placing their own properties on the market. Although not yet widespread, this emerging trend is a marked shift from the prevailing position for the past sixteen months.

In a year where convention has counted for little, another new trend has been the emergence of the ‘offers in the region of ’ guide price. This new pricing structure, which in some quarters appears set to usurp the traditional ‘offers over’ Scots bidding system, reflects precisely the predictability of sale prices for 80% of this year’s transactions. Crucially, it does not prevent a premium where competition permits, unlike a ‘fixed price’ at the outset. Equally Home Reports, so controversially introduced in December 2008, appear set to stay. Many working within the property industry in Scotland will look for some revision to the overly prescribed format of the Single Survey once the initial stakeholder review is completed later this year.

However there can be little argument that for both buyers and sellers Home Reports have acted as a belay point on the slippery rock face that has been the property market over 2009, tempering seller expectation and offering proven impartiality to buyers. We at Rettie & Co have tracked the accuracy of Home Reports by examining how close the year’s Single Survey valuations have been to actual selling prices for properties we have handled. The results suggest a close correlation whereby 85% of transactions are within 7% of the valuation, and 45% within 3%.

field facts

Rettie & Co has offices in Edinburgh, Glasgow, Melrose and London

www.rettie.co.uk