Lack of buyers is dampening house prices in Scotland
SCOTLAND’S housing market is being hampered by a shortage of buyers and is struggling compared to other parts of the UK, according to a new report.
A survey by the Royal Institute of Chartered Surveyors (RICS) found a decrease in both buyer inquiries and sales in Scotland last month, while prices have fallen over the past quarter.
However, there has been a rise in the number of people looking to sell, and surveyors believe the rate of sales is set to increase – although they are not as confident as their colleagues in other parts of the UK.
Meanwhile, most Scottish surveyors expect prices to continue to fall in the coming months.
Despite the gloom of the RICS survey, housing experts in Scotland believe the market is picking up. The Edinburgh Solicitors Property Centre (ESPC) says sales are increasing, as many sellers are now prepared to accept offers below their home report valuations – although this also means that prices are continuing to fall.
RICS chief economist Simon Rubinsohn also believes there is reason for optimism north of the Border.
“I’m not saying that everything is rosy,” he said. “There is clearly uncertainty in the market, and perhaps more in Scotland than other parts of the UK, but I don’t think Scotland is unique.
“Prices have fallen in Scotland by quite a way and I think they are now going to stabilise.
“If activity [in Scotland] takes its cue from the rest of the UK, and the pain in the public sector gets absorbed by the private sector, that will provide a pick-up in transaction activity.”
Across the UK, the warm weather, and a rush of first-time buyers trying to beat the end of the stamp duty exemption on 24 March, gave the housing market a boost last month.
Apart from the north of England and East Anglia, Scotland was alone in seeing a fall in interest from new buyers last month, according to surveyors.
The better weather saw an increase in people looking at properties, but surveyors say it has failed to kick start the market in Scotland.
Alasdair Seaton, of DM Hall, in Dunfermline, said: “The milder winter and sunny March have brought people out earlier to look for properties.
“There is an optimistic feel about the spring market, but no effect on prices yet.”
Alex Inglis, of CKD Galbraith, in Kelso, in the Borders, added: “We have had an encouraging start to the year, probably helped by the slightly less gloomy economic reports in the media.”
However, economic uncertainty, fears over jobs and difficulty in getting a mortgage agreement continue to make life hard for first time buyers.
Greg Davidson, of Graham & Sibbald in Perth, said: “The market continues to be sluggish and is being held back by economic uncertainty, a lack of liquidity and a fear that prices could decrease further particularly in relation to inflation.
“It is all too easy to be negative, with further tightening of bank finance in 2012, but once this is behind us I would foresee some confidence coming back.”
Despite the overall negativity of the report, some surveyors are cautiously optimistic about the Scottish market’s prospects.
Chris Highton, of Allied Surveyors Scotland in Selkirk, in the Borders, said the spring rush was back “with a vengeance”.
“Large numbers of instructions for new home reports suggest sellers are now more confident,” he said.
“Large numbers of replacement home reports suggest that the market is moving again. Early days, but some good signs.”
A continued fall in prices could spark more activity and an increasingly busy housing market, particularly in urban areas, according to property experts.
Last month’s Bank of Scotland Affordable Cities Review found that the average price for a city home in Scotland, at £158,706, is 4.96 times gross annual average full-time earnings – the lowest it has been since 2004, when it was 4.79.
The bank said the “marked improvement” in affordability in cities in recent years has been driven by a significant fall in urban house prices.
The ESPC also anticipates further falls in house prices, but believes the market is healthier than the RICS report suggests.
ESPC analyst David Marshall said: “Every month this year we’ve seen an annual increase in sales. We’ve had 1,431 sales this year compared to 1,270 during the same period of 2011, that’s an increase of about 12.6 per cent.
“Each individual month things have been up, so it’s consistent, and it’s not just Edinburgh, but in Fife and across the Lothians.
“And from speaking to our counterparts this is happening across the country.”
Mr Marshall added: “Prices are lower than this time last year. Sellers are accepting 5 per cent below home report valuations on average.
“In terms of house prices, Scotland is slightly below the rest of the UK, but in terms of the number of sales, we are following the trend of the rest of the country.
“In terms of the number of homes selling, I would expect that to edge up over the next few months.
“I don’t expect we will see a significant increase in prices, I would expect them to be in line with what we’ve seen in the last few years or just below.”
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