Soaring house sales fuel confidence in recovery
HOPES have been raised for a sustained recovery in the beleaguered Scottish housing market after figures revealed rocketing sales in the last quarter helped to stoke growth of more than 17 per cent on this time last year.
• Glasgow saw sales volumes rise by 11.2 per cent year on year. Picture: Colin Hattersley
The latest report from the Registers of Scotland showed there were 19,004 residential house sales north of the Border between April and June, compared with 14,662 between January and March – a rise of 29.6 per cent.
Over the past year, sales across the country increased by 17.1 per cent, alongside a rise in the average house price, which went up by 5.3 per cent to 153,248 compared with the same quarter in 2009.
Experts described the rise as "very positive", but sounded a note of caution about the housing market, warning that the recovery was still fragile and could yet slow down before the end of the year, as the supply of houses continued to outstrip demand.
Solicitors also called for banks to put more money into the mortgage market to help to boost sales from first- time buyers.
The figures revealed wide variations in the performance of the housing market in Scotland, with annual sales volumes soaring in areas such as Angus (up 30 per cent), Dumfries and Galloway (up 29.5 per cent) and Perth and Kinross (up 33.7 per cent).
Glasgow and Edinburgh saw sales rises of 11.2 and 17.3 per cent respectively; volumes rose by 14 per cent in Aber-deen and were up slightly by 0.8 per cent in Dundee.
However, sales dropped by 0.6 per cent in East Ayrshire, and were down 17.7 per cent in the Shetland Islands.
Edinburgh remained the most expensive area in the country, with a home in the capital costing an average of 213,915, a rise of 7.8 per cent on the same time last year. Property in the Western Isles remained the cheapest at an average of 96,807, and houses in East Lothian saw the biggest annual rise increasing 17.9 per cent to 201,359.
In all, the statistics meant the Scottish residential market experienced its fifth month of continuous growth, a result that was met with guarded positivity among those in the industry, with some noting that the vast quarterly rise reflected a traditional change in market activity from the start of the year when house sales were traditionally low.
Jason Scott, estate agency partner at Warners, said the figures were "very positive" and indicated "the worst of the fallout from the credit crunch is now behind us".
He added: "However, while the outlook is positive, I believe house prices are actually likely to fluctuate over the next 12 to 18 months as both negative and positive economic indicators feed in.
"In Scotland, we have an above-UK-average number of public-sector staff, and this means that the current budget-tightening in that sector is likely to slow down market growth."
He went on: "Although areas like Edinburgh, where the services sector is strong, may see house prices remaining fairly steady in the short term, there are other parts of the country where this will not be the case. In areas where public sector dependency is higher, the price rises currently being seen are unlikely to be sustained."
He added: "In the longer term, I believe we will see further increases in Scottish house prices. We have a historic shortage of housing stock that has been made worse by the credit crunch, and once the banks start to ease their lending criteria and make it easier to borrow money, we will see more people entering the market."
Wilson Hunter, the senior partner of residential firm Hunters Residential, said the year-on-year figures were "encouraging" despite being based on a comparison with dreadful 2009 house sales.
But he warned: "Supply is still outstripping demand. ESPC (Edinburgh Solicitors Property Centre) figures tend to suggest there is an awful lot more property coming on to the market than going off.
"That can only have one effect on prices ultimately. Yes, it is encouraging, it is not surprising, but we have to be realistic about the next six months, which I anticipate are going to be pretty tough.
The 30 per cent being quoted makes it look like we are flying, and that is not the case."
Mr Hunter said the market would be helped if the UK's banks, which are all expected to report a return to profit this week, were encouraged to lend to first-time buyers.
"You hear the call for them to support small businesses, but from a property market point of view, I would have thought it was vital for them to support the mortgage market," he said.
"The property market has been one of the main bastions of the economy for long enough, and they should be focusing on the lower end of the market, and trying to make some money available for those that want to get on the property ladder."
Robin Stimpson, the head of residential property at Anderson Strathern, said the figures appeared particularly buoyant because the market had emerged from such a low, adding: "We are nowhere near where we were at the peak of the market. The positive is it is improving and I would agree with that. It is not necessarily uniform across the market and mortgage availability has a factor to play. Sales where the size of the mortgage is less important – that is reflected in the prices.
"The middle to upper range is doing better than the first-time buyers' market, but cumulatively, there is no doubt it is doing much better."
Meanwhile, Tony Perriam of Retties claimed sales had been helped along by the increased certainty on house prices offered by the much-maligned home reports, which compel sellers to have a survey of the property carried out before putting it on the market.
"We are in a stable and predictable market place where prices are underpinned by the independent valuation in the home reports," he said. "The feeling in the market is that has been a good thing in the tough two years we have had.
"Home reports have been a useful beacon. It is impossible to introduce a residential property into the market in Scotland that is overpriced."
As to the future, Mr Perriam said sales would inevitably drop towards the end of 2010.
"Some of the figures will inevitably show a falling back in volume, because in the next quarter, July and August tend to be two of the quietest months in the calendar," he said.
The overall caution was restated by David Marshall, of the ESPC, who said the 30 per cent rise from last quarter could be "a short-term spike".
"The figures are coming from a low level, and while it is an improvement, the headline figure doesn't mean we are returning to the levels seen in the boom," he said. "I would describe the progress as slow and steady."
The Scottish Government welcomed the figures, but struck a similarly wary note.
Housing and communities minister Alex Neil said: "We are cautiously optimistic about the Scottish housing market, and we are continuing to do all we can to build more affordable homes and support construction jobs."
Upbeat bulletin at odds with forecasts
The latest Registers of Scotland report was the most upbeat housing market bulletin of recent weeks after a series of reports pointed to a housing market double-dip.
The UK's housing market analysts produced a slew of data last month to reinforce impressions that not only has the housing market recovery ground to halt, but we may be on the brink of a new slump.
The Nationwide said UK house prices fell by 0.5 per cent in July. House prices are now just 6.6 per cent higher than a year ago, compared with 8.7 per cent in June and 10.5 per cent in April, according to the Nationwide.
The Halifax house price index also fell in June, for the third successive month. Prices dropped by 0.6 per cent in June from levels in May - the fourth decline in the past five months, said the Halifax, owned by Lloyds Banking Group.
And the last monthly report from the Royal Institution of Chartered Surveyors revealed that buyer demand dropped to its lowest point for two years in June.
Mortgage lending has also dropped off. The latest updates from both the Bank of England and the British Bankers' Association showed a fall in lending in June, with mortgage approval levels up only marginally on the beginning of the year and well down from the end of 2009.
The consistently downbeat figures sparked a fresh round of expert forecasts. PricewaterhouseCoopers claimed there was a 70 per cent chance that by 2015 the real cost of a property would be lower than in 2007, with a 50 per cent chance that it would take until 2020 for the market to pass its previous peak.
Capital Economics has suggested prices could fall by as much as 23 per cent by the end of 2012, citing a disconnect between prices and earnings, while the National Institute of Economic and Social Research recently predicted an 8 per cent fall in real terms over the next five years.
There has been one notable dissenting voice. The Centre for Economics and Business Research (CEBR) earlier this week forecast a 4 per cent rise in house prices this year and believes the continued shortage of housing supply in the UK will drive prices up for at least the next four years.
• Jeff Salway: 'First-time buyers are largely frozen out of the market'
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