House prices hit recession depths across the Lothians

HOMEOWNERS in the Lothians have been dealt another blow as new figures have revealed that house prices have fallen back to levels last seen during the depths of the recession.

The latest statistics, published by the Edinburgh Solicitors' Property Centre (ESPC), revealed that the average cost of a home in Edinburgh dropped 4.4 per cent to 214,938 in the three months to May, compared to the same period the previous year.

The city centre was particularly hard hit, suffering a 10.5 per cent drop - after a 14.5 per cent annual rise in 2010.

The organisation, which represents the majority of property lawyers in the area, warned that further falls were likely, predicting year-on-year drops of about 5 per cent over the coming 12 months.

Overall, prices have fallen back to about the same level as achieved in 2009, when Scotland was in the grips of the credit crunch and the housing market ground to a near halt.

Last year saw an unexpected rise in property prices, which experts claim was distorted by a very small number of sales.

"At the start of last year prices rose sharply fuelled in largely by comparatively high demand in the middle to upper end of the market," said David Marshall, analyst at the ESPC. "These rises are now being offset by falls in the early part of 2011. This has taken us back to more or less where we were in 2009."

He added: "Our expectation is that prices will continue to edge down by around 3-5 per cent as prices continue to come down from the high levels seen last year."

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In West Lothian and Midlothian, the slump was even more pronounced, the new figures showed. The price of property in those areas plummeted by 15.8 per cent and 7.8 per cent respectively over the three month period to 142,978 and 160,922.

However, in East Lothian, the price of an average home rose by 7.9 per cent - although analysts warned that the boom there was likely to be short-lived.

Sellers are finding it increasingly difficult to achieve what they believe to be a realistic price for their home, as a glut of properties - about a third more than usual - have hit the market in recent months.

The ESPC said it had about 5,400 properties on its books, compared to an average of 4,000 at this time of year, pre-credit crunch.

However, the body said fewer people were in a position to buy the properties currently up for sale, producing a strong "buyers' market".

"Conditions in the market favour those looking to buy," said Mr Marshall."There are around 35 per cent more properties for sale than you would normally expect to see at this time of year meaning sellers are having to show more wiggle-room? in negotiations.

"There are a lot more properties on the market than there are people who want to buy."

In Edinburgh's popular Marchmont and Bruntsfield districts, the average price of a two-bedroom flat fell by 15 per cent this year, but this followed a massive 35.6 per cent rise last year. Central areas Stockbridge and Comely Bank saw a 7.4 per cent drop in the average price of a two-bedroom flat, on the back of a rise of 15.6 per cent at this time last year.

Mr Marshall said: "Low sales volumes will continue to mean there is some volatility in figures but generally we expect to see prices continue to come down from the high levels seen in the middle of 2010."

He added: "Many sellers are finding they have to lower their expectations on the price their home will achieve, although obviously when it comes time for them to buy the shoe is on the other foot, meaning they will probably be able to spend less on their next home than they may have thought."

Graeme Hartley, director of the Royal Institute of Chartered Surveyors Scotland, said: "I'd agree with the ESPC report reflecting it being a buyers' market, as sellers are more realistic about current property prices; this is especially so for the cash-rich buyers as the lack of flexible mortgage finance remains a hindrance for many and until that is resolved we're unlikely to see much growth in the market."

He added: "It is important to be conscious of the fact that the market in general is quite quiet, meaning sample sizes are small so that even minor changes can be exaggerated either way: the trend is there is no trend, as it is difficult to draw any conclusions from month-to-month data at the moment."

Only 33 per cent of fixed price sales over the last three months achieved the asking price, compared to 45 per cent over the same period last year.

Harry McGeough, director at Mortgageforce Scotland, said fluctuations in home price valuations could cause problems for people trying to buy a new property - or remortgage their existing one.

"The problem is based on what people believe is the valuation of their property and what actually happens when a surveyor comes out," he said. "This is just reflective of the way the market is."

He added that falling prices could mean people find they are no longer eligible for cheaper mortgage deals available to people with a higher proportion of equity in their property."The new figures from the ESPC suggest that things are going to be tough for people trying to remortgage in today's market as falls in price just eat away at any equity they have in their property," he said.

Scott Brown, partner at estate agency Warners, said that sellers had not embraced the "buyers' market", warning that many people are running the risk of not achieving a premium price - or even a fair price - for their property due to cutting corners with sloppy redecorating and maintenance.

"This is traditionally a very busy time of year for the property market, as many people decide to put their homes up for sale in the late spring months," he said.

"However, this also creates a surplus of properties on the market. It's therefore imperative that these sellers think more creatively about how they can make their properties more attractive to secure a sale."