Confidence falters in Scots housing market

CONFIDENCE among Scottish housebuyers is weakening as the prospect of rising interest rates and economic uncertainty looms into view.

Fewer first-time buyers are actively searching for a property amid fears they could be buying at the height of the market, with a slump now possible. In addition, fewer home-owners are looking to move in the next 12 months.

The quarterly Housebuyers’ Survey from the Clydesdale Bank, which examines attitudes towards the Scottish property market, also found fewer buyers prepared to offer 20 per cent over the asking price to secure their dream home, a clear signal that consumers do not want to overstretch themselves during a period of financial hesitancy.

Although close to two-thirds (59 per cent) of Scots believe that the value of their home will increase in the next 12 months, this is a 3 per cent decrease on last quarter. Just 10 per cent feel secure enough in their jobs to move, and more than half (55 per cent) think interest rates will rise in the next year.

Martin Allton, the head of mortgages at Clydesdale Bank, said: "There’s great speculation that interest rates may increase in the forthcoming year and the overall indebtedness of the consumer is increasing.

"First-time buyers represent 40 per cent of the market, and if they begin to drop, then you can quite clearly see the bottom may be about to drop out."

Consumer confidence could be as critical to the future shape of the housing market as the economic climate, say experts.

Alex Bannister, the group economist for Nationwide, said: "The market induces a mild panic among buyers, who feel they have to borrow more because if they don’t buy they will miss out. Buyers, particularly south of the Border and in hot-spots such as Edinburgh and Glasgow, have become used to 10 per cent annual growth."

The Clydesdale report also shows almost one in five now opts for a flexible mortgage, allowing payments holidays.

Jim Armstrong, the head of marketing at Clydesdale Bank, admitted there were "significant signs of pessimism".

He said: "More than half of housebuyers expect interest rates to rise through 2003, and with speculation rife that negative equity could soon be looming on the horizon once more, they are not keen to overstretch themselves."