Good news for sellers as house prices creep up amid gloom

Scotland has seen an increase in property prices in February. Picture: Robert Perry
Scotland has seen an increase in property prices in February. Picture: Robert Perry
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THE Scottish housing market was given a boost yesterday when two reports revealed the average price of a home north of the Border rose in February.

A report from the Office for National Statistics found that Scotland experienced the biggest year-on-year price rise of anywhere in the UK, with a 1.1 per cent increase to reach an average value of £177,354.

A separate study issued by LSL Property Services and Acadametrics found that the cost of a home in Scotland rose in February compared to the previous month after four consecutive months of falls – but slumped compared to the same period last year.

However, the increase was only 0.1 per cent from last month, offering scant hope for homeowners anticipating a return to a boom market, the Scotland House Price Index said.

Experts claimed the slight rise was partly fuelled by a strong demand from first-time buyers battling to get on the housing ladder before the end of the stamp duty holiday at the end of last month.

“Broadly speaking, mortgages have become more affordable than they’ve been at any point since the downturn, which should soften the blow of the stamp duty holiday ending,” said Gordon Fowlis, regional managing director of estate agent Your Move. “Demand is still healthy, despite tepid economic growth, and that should help support house prices.

“However, in the longer-term, the outlook is much murkier. The fortunes of the housing market remain inexorably tied to fallout from the European financial crisis, which could hinder banks and building societies’ ability to satisfy the high demand for mortgages.”

According to the LSL report, when compared with the same month last year, Scottish prices fell by 1.6 per cent.

But the number of transactions in Scotland was also higher in February – a total of 4,422 properties from the sales of an extra 880 houses and a rise of 22 per cent over the past few years.

That was despite February usually being the quietest month for Scottish home sales.

The biggest rise was on Orkney, where prices soared by almost 30 per cent but, in the Inverclyde region, they dropped by 16.6 per cent. In Glasgow, prices fell 3.6 per cent to £126,292, while in Edinburgh, they dropped 2.9 per cent to £210,861. The average house price across Scotland fell, year on year, to £145,860.

The huge increase in Orkney was due to the sale of one property at £300,000 and another at £405,000 – high values considering only 30 sales of houses worth £300,000 or more have taken place there in the last 12 years.

Dr Peter Williams, housing market specialist and chairman of Acadametrics, said: “At £145,860, the average price still hovers close to a level last seen in December 2009.

“Despite the month’s overall average house price increase, we can see that the average price in almost all local authorities has fallen over the past year, much in line with the fall for Scotland as a whole.”

According to the ONS report, typical UK house prices edged up by 0.3 per cent to £224,473 in February – but analysts warned that the weak economy and low consumer confidence are likely to drag prices down in the coming months.

Howard Archer, chief UK and European economist at IHS Global Insight, said prices were expected to drift downwards in the coming months “in the face of generally weak economic fundamentals and low consumer confidence”.

“Specifically, we expect house prices to fall by around 3 per cent by the end of 2012,” he added.

Read the full report on house prices from the Office for National Statistics