Housing demand, sales and prices all heading downhill

Renewed economic uncertainty and continued difficulty in obtaining mortgage finance hit the Scottish housing market last month.

The Royal Institute of Chartered Surveyors (RICS) Scotland said sales levels continued to be subdued and warned the number of sales will decline over the coming months, pushing house prices lower as supply outweighs demand.

Almost 90 per cent of chartered surveyors said they believed the main reason for the slump was the concern surrounding the economy.

Experts have warned that a double dip recession could be likely as growth forecasts for the UK were downgraded, amid high inflation, public spending cuts and tax rises.

The monthly report from RICS Scotland comes just days after ratings agency Fitch warned that UK property prices were likely to plummet by 10 per cent a year for the next two years.

A further 79 per cent of those surveyed by RICS Scotland said they felt a lack of mortgage finance was impacting negatively on transactions.

“Scottish buyers are worrying about the economy and whether they can afford a mortgage,” said Graeme Hartley, director of RICS Scotland. “So they are unwilling to make what is probably the biggest purchase of their life, until there is stability.”

Mr Hartley said he expected the housing market to become even more sluggish in the coming months.

“But until first time buyers take the plunge, the rest of the market will move slowly,” he added.

Last month, 92 per cent of chartered surveyors said they believed house prices had either dropped or remained the same. A quarter of respondents added that fears over house price falls were affecting transaction levels – as buyers avoid the market while they wait for things to improve and for properties to drop even further.

“Continued lack of confidence in the economy means that there are not enough buyers available for the property currently on the market,” said surveyor Alexander Inglis of CKD Galbraith in the Borders.

“Market conditions have been somewhat subdued,” said Andrew MacFarlane of surveying firm Graham + Sibbald in Hamilton. “The property market requires a consistent flow of first time buyers to allow people to move up the property ladder.”

“As a consequence of the limited availability and high costs of mortgage finance, many prospective first time buyers are being driven to an ever more competitive rental market.

“As demand for rented accommodation increases, so does the rents commanded in popular locations which are subsequently curtailing the ability for those prospective buyers to raise an adequate deposit.”

However, surveyors in some areas in the north of Scotland reported more positive levels of activity.

“A quiet period over the summer has been followed by a return to previous levels of activity, not busy, but buoyant by comparison with most areas,” said Gordon Macdonald of Allied Surveyors in Aberdeen.