Capital house price slump 'will last four or five more years', says agent

EDINBURGH may not see a recovery in its property market until the middle of the decade, according to one of the capital's leading selling agents.

Warners, solicitors and estate agents, said tight restrictions on mortgage borrowing were prohibiting any growth in the city's property sector - meaning house prices were likely to "flatline" until the middle of the decade.

It said the ongoing economic slowdown had led to a surplus of properties for sale and not enough demand among buyers."

The firm said the days of huge premiums on "offers over" were long gone, but buyers and sellers would be able to move home providing they had "realistic expectations" about what prices their properties would reach.

Scott Brown, estate agency partner at Warners, said: "With mortgage lending being so restrictive at the moment, many people are finding that they cannot afford the necessary deposit required to put down on a home - so they are choosing to rent a property instead.

"This is taking a huge number of would-be buyers out of the market and is increasing competition among sellers, keeping prices steady.

"As many public sector jobs are also proposed to be cut in the city and the economic conditions do not look like improving dramatically in the short term, this situation is likely to continue for the foreseeable future. It could easily be four or five years or so before we start to see any significant rise in house prices."

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Neil Harrison, the marketing manager at the Edinburgh Solicitors Property Centre, said: "Five years is a long time to look ahead, but as long as banks are restricting lending, it is going to make it challenging for first-time buyers to get on the property ladder. But people in Edinburgh have got used to seeing property figures going up double digits in the course of a year, and that is not sustainable. The ideal is people being able to sell up and move and others move in, as opposed to prices rising."

However, Mark Hordern, a spokesman for the Glasgow Solicitors Property Centre, predicted mortgage lending could improve within a couple of years.

He said: "Warners' forecast seems pessimistic and a five-year period is a long time to forecast. It is unlikely that we will see the heyday of 100 per cent mortgages, but we could expect to see lending improve from around 2012 onwards.

"However, their underlying analysis is correct. It is very difficult for first-time buyers to buy a property unless they have 20 per cent of the deposit, and this makes things difficult for those who want to sell."

David Bookbinder, head of policy at the Chartered Institute of Housing in Scotland, said: "There is now a bigger demand for private renting which can't be met. At the same time, the big cuts to social rented housing from the spending review means people are squeezed at both ends."