City house prices 'unlikely to rise for up to five years'

HOUSE prices in the Capital are unlikely to rise for at least four to five years due to restrictive mortgage lending, property experts warned today.

One of the city's largest property solicitors said prices were likely to remain flat until the middle of the decade due to the difficulties faced by first-time buyers.

But Warners said there would be no "property meltdown" in the city because buyers and sellers now had more realistic expectations where house prices were headed.

The firm said the economic slowdown had led to a surplus of properties being put up for sale in the Capital, with not enough demand among housebuyers to match the supply of homes on the market.

Scott Brown, estate agency partner at Warners, said: "There's no doubt that house prices are slowing in Edinburgh. For months there has been a steady increase in the number of properties being put up for sale and there simply is not enough demand there to match this supply.

"With mortgage lending being so restrictive at the moment, many people are finding that they cannot afford the necessary deposit, 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 - which is keeping prices steady."

There are currently around 3500 properties listed for sale in the city and the number of new listings is continuing to outstrip the number of sales.

Mr Brown said it would "easily" be four or five years before any significant rise in house prices in the city due to the continuing economic gloom and public sector job cuts.

But Neil Harrison, a spokesman for the Edinburgh Solicitors' Property Centre (ESPC), cautioned against looking too far into the future.

He said: "We have seen recently how things can change and how looking too far ahead can be a slightly dangerous thing to do.

"However, the ability of first-time buyers to get on the property ladder will continue to be constrained unless banks can be encouraged to look more favourably on lending.

"Over the next six months we're going to see prices coming back down and we expect to see the average house price in Edinburgh at around the 200,000 mark.

"The last time that happened was when we saw the market begin to pick up again."

Warners said the days of buyers paying vastly inflated offers over prices were "long gone."

Mr Brown added: "The attitude that people are taking now is that even if they make a loss on their sale, they are likely to gain by paying less for their next purchase.

"For example, if someone makes a 10 per cent loss on the home that they are selling, they will also be buying their next property for a similar 10 per cent reduction."