Capital house prices drop to 2009 levels – and there’s worse to come

Published on Friday 7 October 2011 00:47

House prices in Scotland’s capital have slipped back to 2009 levels after the latest falls wiped out the gains made last year.

The average recorded house price in Edinburgh was more than £13,000 lower in the three months to the end of September than in the same period last year, according to the Edinburgh Solicitors’ Property Centre (ESPC).

The organisation, which said it expects prices to continue falling, were published as the UK’s biggest lender, the Halifax, reported that house prices fell by 0.5 per cent last month, following a steeper decline of 1.1 per cent in August.

ESPC revealed that the average house price recorded in Edinburgh between July and September was £216,673, down 5.7 per cent from £229,787 in the corresponding period in 2010.

The biggest fall was in the city centre, where prices were 13.5 per cent lower, although the average price of a one-bed flat in the Leith and Easter Road area of the capital jumped by 9 per cent.

David Marshall, business analyst at ESPC, said conditions still favour buyers even after a decline in the number of homes on the market.

“There are more homes for sale than you would normally see at this time of year whilst the number of people who are in a position to buy is still relatively low. Sellers are having to work harder to attract buyers and in most cases will have to be willing to offer a little leeway on price if they are to secure a sale.”

The biggest slowdown has been among smaller properties, where the squeeze on first-time buyers has driven down prices on one and two-bedroom flats.

The overall price drop in Edinburgh was in stark contrast to increases of 11.3 and 10.6 per cent in Midlothian and West Lothian over the past quarter.

In Dunfermline house prices held firm, with an average drop of just 0.3 per cent, while there was a year-on-year fall of 10.6 per cent in East Lothian.

However, the marked increases in the Lothians were due partly to low activity levels, with a handful of sales distorting the overall figure.

And Mr Marshall believes the recent price rises in Midlothian and West Lothian will prove to be anomalies.

“The number of homes selling is still quite low, meaning that when you drill down to a regional level it only takes a relatively small number of sales to skew the average house price figures,” he said.

He warned that prospects of a rebound in house prices in Edinburgh and the Lothians over the coming months are slim, predicting that prices in most areas will continue to be around 3 to 5 per cent lower than a year ago.

“The economic recovery remains weak and we do not expect to see a significant improvement in consumer confidence or mortgage availability in the short term, meaning that in 2012 the number of homes selling will be broadly in line with what we have seen this year.”

Tony Perriam, director at Rettie & Co in Edinburgh, said it had seen an increase in activity in the July to September quarter.

“In our view, prices in the middle and upper segments of the residential market are static rather than falling, and overt discounting appears to be restricted to the lower to middle parts of the market,” he said.

“Prices take longer to unlock than in the period to early 2008, of course, but all sellers are aware of this.”