Scotland begins to feel the chill of housing slump

A snapshot survey by The Scotsman yesterday also showed that although some sellers were already feeling the pinch in Scotland, opting for fixed-price sales or lower starting prices, many said they were still confident of a good deal. Even as the Prime Minister, Gordon Brown, held talks with bankers in Downing Street, estate agents north of the Border insisted they were "quietly confident".

They even claimed that Scotland, and Edinburgh in particular, could benefit from the downturn in the south of England, as Scots working in London might be lured home by cheaper prices. Such a phenomenon was seen in the recession of the early 1990s.

They spoke out as government figures showed prices across Britain fell by 1.6 per cent in February, with annual growth slowing to its lowest level for 19 months. But Scotland saw gains of 9.7 per cent during the same month.

Research from the Royal Institution of Chartered Surveyors (RICS) showed that, although a record number of surveyors reported falls in property values in March, Scotland had been sheltered from the storm.

However, Prof Bell, a leading economic adviser based at Stirling University, said it was only a matter of time before the slowdown "rippled out" from London, although values were unlikely to fall far.

He said: "I think we are looking for a period of (something] between stability and mild decline (in value]. I suspect it will be towards the decline, but not something that's going to dramatically affect the value of people's houses that they have built up over the years.

"If there is a decline, it would not be a very marked decline. We might get a decline from June to July, but we are not looking at a substantial decline in value over, say, what the prices were a year ago."

He went on: "I would be very surprised if Scottish house prices were still rising three months from now."

He said the country was not exempt from the lending problems which had affected the rest of the country, as buyers have to borrow from the same banks offering the same deals.

Yesterday's reports from the RICS and Westminster government showed growth had reached a new low, and commentators laid the blame squarely at the door of the credit crunch.

A record 78.5 per cent of surveyors reported a drop in the value of property during March, overtaking figures set during the 1990s house-price crash.

Vince Cable, the Liberal Democrats' Treasury spokesman, said: "It is clear we are now seeing a major and long-overdue correction in the housing market. However, there is a real danger that, with rising personal debt and high inflation, this correction may become a crash. The government must act to ensure we do not end up with mass repossessions."