Edinburgh house prices drop 3.6% - with more falls forecast

HOUSE prices in Edinburgh and Glasgow have slumped in the past three months and are set to fall further as buyers continue to spurn the market, new reports have claimed.

Evidence of a fresh decline in Scotland emerged as the Halifax reported a surprise 1.2 per cent rally in UK prices last month. However, the UK's biggest lender warned that the housing market faced "significant headwinds".

The average price of a home in Edinburgh in the three months to the end of June was 219,530 - down 3.6 per cent from the same period last year - according to Edinburgh Solicitors' Property Centre (ESPC). The average selling price of a flat in the Leith Walk and Easter Road area of the capital is now under 100,000 for the first time since 2006.

There were sharper falls elsewhere in east-central Scotland. The average price of a home in Midlothian in the last quarter was 10.8 per cent lower than a year ago, while the West Lothian average plummeted 9.5 per cent.

House prices in the west of Scotland have also tumbled, Glasgow Property Solicitors' Centre (GSPC) said yesterday. Prices were 2 per cent lower in the last quarter than in the same period last year, taking them back to 2006 levels. The average selling price of a home in Strathclyde is now 136,000, almost 3,000 lower than a year ago, although it has recovered from a recent low of 128,000 last December.

Sales levels were "exceptionally low", GSPC reported, with the average home in west-central Scotland taking over five months to sell.

David Marshall, business analyst at ESPC, predicted year-on-year price falls of 3 to 5 per cent in the coming months. "There are around 30 per cent more properties available for sale than you would normally see at this time of year, and the number of properties selling is around half that seen prior to the credit crisis," he said.

The market will remain in favour of buyers for some time to come, he added. "Whilst there has been a slight increase in mortgage availability recently, we expect market conditions will remain in favour of buyers in months ahead. This should mean prices will continue to inch down in months ahead whilst the number of homes selling will be roughly in line with 2010 levels."

The Halifax issued a similar warning yesterday. It revealed that while the average UK house price rose 1.2 per cent in June, it was 3.5 per cent lower in the last quarter than in the same period last year. Martin Ellis, housing economist at Halifax, said the market faced "significant headwinds" that would constrain housing demand. "Low earnings growth, higher taxes and relatively high inflation are all continuing to put pressure on household finances," he said.

But Scott Brown, estate agency partner at Warners, claimed that Edinburgh's housing market was increasingly stable, with relative price stability encouraging more people to put their homes up for sale."In due course, the wider choice of properties on the market should also deliver a greater volume of sales as confidence among homebuyers grows," he said.