£77 increase in average house price dashes hopes of a revival

Published on Thursday 7 April 2011 15:33

Prospects of a Scottish housing market revival this year appear increasingly slim as static prices frustrate both buyers and sellers.

The average house price in the capital has risen just 77 in the past year, according to new figures from the Edinburgh Solicitors Property Centre (ESPC).

It reported yesterday that sales remain low and warned sellers to set realistic asking prices or face a long wait. Its comment came days after lenders Halifax and the Nationwide both predicted a stagnant housing market and modest price falls over the course of 2011.

Homes sold in Edinburgh in the three months to the end of March fetched an average price of 207,497, inching up from the 207,420 figure in the same period last year.

Average house prices in East Lothian have slumped 9 per cent to 191,539 since a spike in the early part of 2010, while prices in Midlothian are virtually unchanged at an average of 162,855. In West Lothian, the average house price fell 6.3 per cent in the last quarter to 153,043.

The number of homes for sale in Edinburgh and the Lothians is about 25 per cent higher than usual for this time of year, said the ESPC, but transaction levels are still low and a small number of sales at the top end of the market can easily distort price averages.

David Marshall, business analyst at ESPC, said: "The number of homes selling is still comparatively low which can cause some volatility in prices. Where rises have occurred these generally offset falls the previous year and vice versa."

The ESPC expects house prices to fall 3 per cent by the summer before levelling off in the second half of 2011. Lending restrictions continue to freeze first-time buyers out of the market and, with affordability not improving, only sellers setting realistic asking prices are attracting interest, Mr Marshall added.

"The number of first-time buyers remains below normal levels and many have to ask for assistance from relatives in order to raise deposits," he said.

The situation is similar in Glasgow, where activity and prices remain subdued, but Aberdeen has seen a marked increase in activity in recent months.

John MacRae, chairman of the Aberdeen Solicitors Property Centre, said sales volumes were returning to the levels considered normal before the market bubble of the mid-noughties.

"We're back to 170 to 180 homes coming on to the market each week and we're selling 80 per cent of what's coming on. We're encouraged, but we're not saying things are great, as the lower end of the market is still not as good as it should be," said Mr MacRae.There is some optimism in the capital, too, with Edinburgh estate agents and solicitors Warners and Rettie both reporting greater activity in recent weeks.

Tony Perriam, director of Rettie & Co, said: "There is the sense that the feared price falls of 2011 have not materialised, partly of the reassurance that price stability provides, and partly of the realisation that the number of newly introduced properties are less than expected, and that choice is limited.

"All in all, we firmly believe that the positive activity that we have witnessed in the mid-market will have a ripple effect up and down as confidence grows."