Housing bubble warning as property stocks run low

Scotland is at risk of a new housing bubble, experts have warned, as demand for homes continues to outstrip supply amid a rising property market.

Estate agents warn Edinburghs property stocks are running low. Picture: Jon Savage

Figures released today from the Royal Institute of Chartered Surveyors (RICS) Scotland showed that the number of homes coming on to the market once again fell well short of rapidly rising buyer demand.

RICS claimed it was “very concerned” about rising prices due to a lack of homes on the market and said it would launch an investigation into the issue as part of its Scottish Housing Commission remit.

Individual estate agents, particularly in Edinburgh and Aberdeen, warned that their property stocks were running low as more people sought more homes than there were properties on the market.

Separate figures out today from the Council of Mortgage Lenders show that the housing and mortgage markets look set to continue to show greater levels of activity in 2014.

The body forecasted a rise in gross lending from an estimated £170 billion this year to £195bn next year, and £206bn in 2015.

“It’s no secret that the housing market is on the way up and prices are rising in many parts of Scotland,” said Sarah Speirs, director of RICS Scotland. “We are still very concerned about the lack of both new and existing homes coming on to the market.

“At this stage, price rises are well below the extent witnessed at the height of the market.

“However, with more people return to the housing market and supply currently limited, it is important that prices do not rise to such an extent that they become unaffordable.

“For the market to work properly, it’s vital that property is both accessible and affordable, and we’ll be monitoring the situation very carefully as the housing sector continues to recover.”

At the peak of the market in 2007, properties were selling for as much as 60 per cent higher than their “offers over” valuations – pushing average Scottish property prices up 50 per cent over the past decade and sending properties towards an unaffordable level for many buyers.

A net balance of 78 per cent of surveyors expect sales levels to increase in the New Year, assisted, in part, by the Help to Buy scheme – which sees the government take an equity stake of up to 20 per cent of the value of the property – RICS Scotland said.

Rory Ballantyne, of surveyors firm Ballantynes in Edinburgh, said: “The recent Help to Buy announcements have continued to boost buyer confidence in the Scottish housing market, with sales volumes up significantly across both our established homes and new build developments.”

Robert Carroll, managing director at estate agency Mov8, said: “High demand and relatively low supply is great for house prices – if you want house prices to rise, that is. The risk of all this, however, is that we create seasonal peaks and troughs.

“We will potentially see a little price bubble being created during a period of low supply like winter and then see a dip, or correction, when supply levels are at their highest in spring and summer.”

Recent data has revealed that the property market in Scotland has begun to recover in recent months – although sales volumes have generally been more buoyant in cities than in rural areas, figures from the Scottish Solicitors’ Property Centres (SSPC) have shown.

However, Peter Ryder, spokesman for the SSPC, said that a Scotland-wide bubble was unlikely and he expected more homes to come on to the market in the New Year.

“Sales across Scotland continue to increase with all solicitor property centres reporting another rise in November,” said Mr Ryder.

“However, approximately 60 per cent of all properties sold are selling for less than their original valuation. With real incomes continuing to be squeezed, it is unlikely that we will see a sustained increase in house prices.”