Winter chill settles over Edinburgh as homebuyers hold off

By September, Sarah Troy and her husband Graeme had been looking for a detached town house in the west of Edinburgh for a year. The handful of suitable homes she heard about either sold off market or went within a few days. On one occasion she made an offer, alongside 15 others, 15 per cent over the asking price — but the house went for 30 per cent over. Exhausted, she resigned herself to a search that would drag on even longer.

Then, almost overnight, things started to change. “For six months there wasn’t a single house that was suitable; I reckon there have been 25 in September and October,” she says. Agents too busy to return her calls are now approaching her. “Now, we are waiting for exactly the right one: I’m confident we’ll find something in the next few months,” she says.

As higher mortgage rates reduce buyer budgets and many hold back from purchases in case prices fall, home sales in Edinburgh and its surrounds are falling and sellers are dropping prices. The number of homes sold subject to contract on Zoopla in the month to November 20 was 21 per cent lower than a year earlier. Nearly one in 10 homes on the site have had their asking price reduced by 5 per cent or more over the period.

Reductions of this size are uncommon, says Richard Donnell, head of Zoopla’s research department: “Last year, there were no properties with that level of price adjustment in Edinburgh.”

Keen to secure a sale, sellers are accepting the first reasonable offer, according to Sylvia Kuzminski, a local agent. In the summer “95 per cent” of homes she sold went to a closing date — a process whereby multiple offers are made on a home in writing by a certain time, favoured when demand is strong because it typically means homes sell for more. “Today, we’re just not getting the level of buyer interest to justify a closing date,” she says.

In a typical month, Kuzminski sells four to six homes. In October, five of her sales fell through when buyers pulled out, compared with none between July and September. “Most were because buyers had problems getting their finance together,” she says.

“Typically, my clients who are remortgaging face an increase in monthly mortgage payments of 40 per cent to 50 per cent compared with a year ago,” says Rhys Forrest, a mortgage broker serving clients in Edinburgh, Mid, East and West Lothian.

Charlotte — who didn’t want to give her real name — and her husband, who are in their early twenties, had to reapply for a mortgage in September when their home purchase fell through. The home they eventually bought in Gracemount, in the south of the city, was £25,000 cheaper than the one they missed out on; but rising mortgage rates in the interim meant that their monthly payments increased by £200, to £1,026.

“It’s gutting, especially because we’ve been hit at both ends by higher mortgage rates,” she says. “Our first purchase fell through when our chain collapsed: the man who was meant to be buying our house pulled out when he got his mortgage offer and realised that he couldn’t afford the payments.”

Forrest says his biggest drop-off in business since the summer has been among young professionals — typically couples in their late twenties and early thirties selling two or three-bedroom terraced or semi-detached homes to buy four-bedroom homes with a garage and larger garden.

“They can’t afford the combined higher mortgage rates, increased cost of gas and electricity and the bigger house. This was happening even before the ‘mini’ Budget,” he says, referring to former chancellor of the exchequer Kwasi Kwarteng’s fiscal statement on September 23, which sparked turmoil in the financial markets and caused mortgage rates to rise sharply — by November 1, the average rate for a five-year fix hit 6.51 per cent, according to Moneyfacts.

“[Buyers] are staying put and choosing to modify their homes instead,” says Forrest. “From my point of view, demand for those homes has evaporated.” In recent weeks, mortgage rates have fallen back slightly: this week the average for a five-year fix was 5.95 per cent.

Many affluent families with young children favour Bruntsfield or Merchiston. Located near to and south of Edinburgh Castle, these neighbourhoods offer a selection of Georgian and Victorian detached and terraced houses — the most substantial can be priced up to £3.5mn — as well as a good range of state and independent schools, along with easy access to the city centre.

Immediately north of Princes Street, New Town is a popular for its elegant, high-ceilinged Georgian apartments. Further north, Stockbridge is well stocked with delis, cafés and gastropubs, and boasts the city’s botanical garden. There is a good range of period apartments and some houses.

The problems created by high mortgage rates are placing those with little or no mortgage at an advantage: Kuzminski says in some cases, sellers are willing to discount prices for cash buyers.

“Over the summer, agents didn’t give a damn I was a cash buyer. But when I offered on my home in September, they virtually bit my hand off,” says Rachel Yarrington, who bought a four-bedroom detached house in Livingston, West Lothian, for £330,000 after returning from a job in Canada to settle.

She had given up her home search in July, she says: “There were so few homes on the market there was no point. It was just depressing.” When she started looking again in August, she noticed many homes marked as sold were back on the market. “When I went to visit them, I made a point of asking why they were on the market again, it always seemed to be a problem with the buyer’s financing,” she says.

Her cash position left her in charge of the sale process, too, she says: although the seller wanted to delay the completion date to give them time to find another home, Yarrington, who was living with her sister nearby, insisted she move immediately. “I had just emigrated and had my stuff in storage; I wanted to move in straight away.”

“Before, agents didn’t even want to take our details. Today, when you say you’re a cash buyer you can hear the interest in agents’ voices,” says Graeme Troy. He is ready to call agents’ bluff. “The other day, one told me he still had a huge backlog of people desperate to buy. It’s a bit disingenuous: we know we are in a minority.”

The Troy family moved back from Abu Dhabi at the start of the year, and the delay in embarking on their new life has been frustrating. But finally, an end is in sight, and Sarah — who is looking for a large home to renovate or rebuild — is getting excited about the project.

“I’ve gone from feeling quite negative to feeling really hopeful,” she says. “I’m still downplaying it to the children, who had got so excited about designing the bedroom of their dreams — and we said they could have a climbing wall. Finally, I feel like we can fulfil the lifestyle that we came back for.”

What you can buy . . . 

Flat, West End, £495,000

A one-bedroom, ground-floor apartment in a Georgian building on Rutland Square, a short walk from Princes Street. The property, which measures 842 sq ft, has two bathrooms and views over Rutland Square Gardens. There are two parking spaces. Available through Savills.

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Flat, Inverleith, £1mn

A four-bedroom apartment in a Victorian building on Inverleith Row, next to Edinburgh’s Royal Botanic Gardens. The property, which is arranged over two floors, measures 2,464 sq ft, has a private garden, a wealth of period details and two kitchens. Through Savills.

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Terraced house, Stockbridge, £2.4mn

A six-bedroom, Grade A-listed, Georgian terrace on Carlton Street. The property, which measures 4,319 sq ft, is arranged over four floors and has many original features. There is a south-west-facing garden and a front courtyard with two under-pavement cellars. Through Rettie.

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