Edinburgh and Aberbeen lead way as Scots house prices rise slightly

HOUSE prices in Scotland rose slightly in the three months to October in the first quarterly rise in a year – although prices are still depressed compared with the same period in 2010.

The average price of a home north of the Border rose by 1.7 per cent from the previous three months to £155,805, according to the Lloyds TSB Scotland Scottish House Price Monitor – but the figure was still 2.9 per cent lower than a year earlier.

Edinburgh, Aberdeen and the north of Scotland were the only two regions to show growth, while all other areas of the country reported a fall.

Property sales volumes are also continuing to fall, year on year – the latest report has been compiled from a market with a low number of sales once more, but one which is 8 per cent higher than the three summer months ending July this year.

However, compared with the same quarter a year ago, the number of transactions available for use by the monitor is 5 per cent less.

Donald MacRae, chief economist at Lloyds TSB Scotland, said the improvement in prices did not indicate a return to growth in the Scottish housing market – pointing to a still flat overall economic outlook.

He said the Scottish economy had come out of recession at the end of 2009 with a rise in output of just 0.1 per cent, but the subsequent rises had come to a halt at the end of last year. In the final three months of 2010, following four quarters of rising output, gross domestic product (GDP) fell – followed by only a slight rise of 0.2 per cent in quarter one of 2011 and an even smaller increase of 0.1 per cent in the second three months of the year.

A country has to report two consecutive quarters of a drop in GDP before it is considered to be officially back in recession.

“The Bank of Scotland PMI [purchasing managers’ index] indicator suggests a continuation of growth in the third quarter of this year, but at low levels,” said Mr MacRae.

“The Scottish housing market has adjusted to the recession with a halving of sales and a period of volatile price movement. Average house prices are now 90 per cent of their peak of three and a quarter years ago. Consumer confidence remains low due to high levels of retail price inflation in excess of increases in earnings, squeezing disposable income.

“The Scottish housing market did recover from the depressed levels at the beginning of the year, but the overall number of sales remains at less than half of pre-recession levels. A faster recovery awaits a resurgence of both business and consumer confidence.”

The average house price was highest in Aberdeen, according to the monitor – where the figure rose by 2.7 per cent to £210,877.

However, the highest percentage rises came in the Central, Fife, Perth and Tayside region of Scotland – where prices rose 3.4 per cent to £146,258 – and Edinburgh, where prices rose 3.1 per cent to £179,912.

The biggest falls in the three months to October came in the south-west of Scotland outside of Glasgow, where prices slumped by 6.8 per cent to £135,927 – and Dundee, where the average property value slipped by 6.4 per cent to £138,440.