Loan-free buyers perk up prime sales

CASH-rich buyers who do not have to rely on the still-tight mortgage market are boosting sales of "prime" Scottish properties, according to new research by estate agents firm Savills.

As a result, houses over the 400,000 mark are the only residential properties in the UK that will see a slight increase in overall value this year, the firm has said.

The agency warned the rest of the market – including houses in the 150,000-200,000 range, is set for a "double dip", although house prices in Scotland are expected to fall less dramatically this year than in England and Wales.

Savills said it expects the mainstream UK housing market to fall 6.6 per cent in 2010 while it expects a 2 per cent fall in Scotland reflecting historically low price volatility north of the Border. Both markets experienced small recoveries of growth in 2009.

But Savills' research director Lucian Cook said this was a "temporary phenomenon" as continued lack of mortgages and uncertainty caused by the upcoming UK election will mean a still low level of transactions this year.

Although house prices in Scotland remain more affordable than in England as a ratio of income minus housing costs, the market is still only "partially functioning". Particularly troubling is mortgage availability for first-time buyers, where deposits have shot up dramatically, requiring nearly 100 per cent of average income, levels not seen for 30 years.

"There is still a real lack of mortgage finance and if finance can be found the cost is much higher," said Mr Cook.

Savills said Edinburgh's prime market is "leading the way" to a housing market recovery, but that the overall market won't get back to "normal" levels until 2013/14.

"Buyers who are equity-rich, with no requirement to raise finance, are aware that prices have stabilised and are increasingly ready to do business," said Jamie Macnab, director of Savills in Scotland. "International buyers and Scottish expats have also taken advantage of the weaker pound," he added.

Although sales of expensive Scottish homes did not keep pace with similar markets in London, which enjoyed an "astronomical" rebound of 9 per cent in 2009, growth in parts of London was judged by Savills as "sometimes quite scary" but also subject to slight falls this year.

In Scotland, growth in the price of expensive homes was "not astronomical", but shortage of supply will keep the market buoyant.

"Buyers are coming forward to buy fresh properties which are in good condition and realistically priced to reflect today's market," said Faisal Choudhry, associate with Savills Scotland. "These are in short supply and are not remaining available for long," he added.

In the over 1m housing market, sales in Scotland last year fell 64 per cent from its peak in 2007, but recovered well in the second half of 2009. Mr Macnab said the winter pick-up in sales of 1m-plus homes was "bizarre".

"Not much tends to happen in winter usually," he noted. According to Savills, two-thirds of these luxury homes were sold between June and December while Edinburgh fared "considerably better" than other areas in Scotland.

Glasgow's high-end house market is recovering along with Edinburgh, but lags behind and has not yet hit positive figures, according to Savills.