Home comfort with end of slump in sight

Published on Saturday 4 April 2009 19:57

THE painful slump in the Scottish homes market is showing signs of coming to an end, according to a new analysis of house price trends.

Although prices may still continue to drop for several months, the rate of decline is slowing and a recovery could start by the end of the year, says house price website Myhouseprice.com.

Property experts also claim they are witnessing more activity in the market, in which prices plummeted an average of 12% in 2008, with more sales being concluded as sellers reduce prices.

Figures from the Bank of England also suggest that the crippled home loans market is showing signs of recovery despite the continuing reluctance of banks to finance mortgages. Almost 38,000 home loans were approved in the UK in February – 19% more than in January. The fall in house prices also slowed to 0.6%, the lowest fall for 10 months, according to analysts Capital Economics.

The Myhouseprice.com survey analyses house price trends throughout Scotland. It shows that the rate of decline has slowed sharply in Edinburgh, Aberdeen, Dundee and Perth and is stabilising in Glasgow, Stirling and Inverness.

Andrea Gibson, managing director of the website, said the market appeared to be bottoming out. "There is no doubt that 2008 was awful for the housing market, which showed a uniform drop across the country. But now there are good signs across most of the country that the rate of decline is slowing. We may even start to see some growth again towards the end of the year.

"There may be a little further down to go, but if average prices do continue downwards then we will see more first-time buyers and those with cash getting back into the market."

The Strathclyde region, which includes Glasgow, suffered a 10% fall in 2008, stripping around 50,000 off the value of a 500,000 house. But Mark Hordern, marketing manager for the Glasgow Solicitors' Property Centre, said analysis of the first three months of 2009 shows that the pace at which prices are dropping has slowed.

"Recovery is perhaps too strong a word at this point, but the market is definitely settling down," he said. "We are now expecting the market to bottom out sometime this year and this shows that things are going in the right direction.

"There is also an indication that sales are picking up. Although transactions are 50% down on what they were a year ago, over the past few weeks we have been selling more properties than are coming on to the market. That will hopefully persuade more homeowners that they will be able to sell their property if they put it on the market."

Hordern said one of the sticking points in the market until recently was that sellers were still hoping to get big premiums for their property above their asking price.

"It now seems that sellers have come to terms with the fall in the housing market and are coming to more of an accommodation with buyers. That means the number of transactions should go up, getting the market moving again."

In Edinburgh last year, prices fell by around 10%. The Edinburgh Solicitors Property Centre also confirmed that the rate of the fall appeared to be slowing in the first three months of 2009. Spokesman Neil Harrison said: "The rate of decline is slowing. The average house price in Edinburgh has been consistently in the 190,000-200,000 range for several months now, which suggests the market is stabilising.

"The number of properties on the market is also coming down as sales have picked up."

The pick-up in sales is being credited to the number of cash-rich buyers who succeeded in selling their own properties before the worst of the market slump and then waited until prices fell further to snap up relative bargains at discounted amounts.

Tony Perriam, director of residential sales at Rettis & Co., said: "As the market nears the bottom of the property trough, there are several discernible trends in the way the property market is now operating.

"One is that since 2008, three out of four buyers have already sold their property before offering on another. This is a sea-change from the peak in 2007 when people were buying then selling. Today's buyers are cash rich, and with their own property sold, expect the certainty and speed of sale they are offering the seller to reflect in the discount procured on the property.

"As a result, house sellers are often accepting less than expected, but then as cash buyers themselves, are finding they are in the driving seat to use the opportunity to move up the property ladder."

Savills property agency has also reported an increase in sales over the last month. Peter Lyell, head of residential sales, said: "We have had two closing dates for the first time in some time. Interest is being translated into bids, closing dates and sales. It means the system is getting back into working order."