First Edinburgh house-price fall since 1971

For 37 years, there had never been an annual fall in prices: not during the oil prices shocks of the early 1970s or even during the property crash of the late 1980s and early 1990s.

But now the unimaginable has happened – prices are down.

The Edinburgh market has traditionally been resilient due to its large stock of period properties, a rising population and a limited number of new homes coming on the market.

This is in part due to the lack of available land for housebuilding and the policy of maintaining the green belt.

Property experts said they were "astounded" by the new figures and added that the credit crunch and lack of confidence in the market was responsible.

Blair Stewart, a partner at estate agents Strutt and Parker, said: "Edinburgh is still one of the safest places to invest. But people are now paying closer to the survey value.

"People are nervous about getting hold of the money. The days of 100 per cent mortgages on top-end properties have gone and the days of easy money have gone."

The figures will come as a shock to estate agents in the rest of Scotland. If prices in the solid Edinburgh market are falling, many will be now be asking: "Where next?"

Sandy Burnett, a partner with Murray Beith Murray solicitors and estate agents, said:

"These figures reflect what everyone knows. There are far too many modern two-bedroom flats in Edinburgh. These are the ones that have been clogging up the market … and there is no demand for them. Developers have had to cut their prices. But stone-built, traditional family houses will hold their value."

This latest survey will serve only to confuse householders, just weeks after reports suggested Scottish house prices had risen again.

Last month, Lloyds TSB Scotland's Scottish House Price Monitor showed that quarterly figures to the end of July rose by 1.6 per cent, giving an average house price of 172,185.

Ron Smith, chief executive of the ESPC, said the rise in the number of properties available, coupled with the constraints in demand caused by tightened lending criteria, had left buyers in a stronger position to negotiate lower prices with vendors.

"These figures show that those sellers who wish to secure a sale are now starting to accept the change in market conditions we have witnessed over the last number of months.

"Most sellers are also in a position where they are looking to purchase a new home, so they are able to balance accepting a lower offer on their current property by taking advantage of their stronger negotiating position when they come to buy."

Mr Smith said the "correction" in prices was not necessarily a bad thing because it could prompt many house-hunters to take the plunge.

"One thing that has stunned us is the number of first-time buyers who are sitting on a deposit with the money to move.

"If you are a first-time buyer, I would think this is the time to commit because we have seen a correction in the market on house prices."

The average premium paid over the asking price on properties sold at "offers over" has fallen to 14.3 per cent, down from over 27 per cent in August 2007.

Figures also show more than 62 per cent of those selling properties marketed at fixed price accepted an offer below the original asking price, up from less than 28 per cent last year.

How capital isn't immune from downturn

6.5%

Downturn recorded by Edinburgh Solicitors Property Centre (ESPC)

201,517

Average property price in city

60%

Drop in property sales

400

Homes sold in August

3,400

Homes advertised for sale in Edinburgh

2,000

Homes advertised at same time last year

14.3%

Average premium paid over asking price for offers-over properties

27%

Average premium paid over asking price at same time last year

62%

Of those selling properties for fixed-price accepted offers below original asking price

28%

Accepted lower offers last year