Property hits plateau with market ‘down but not out’

The quarterly price index for properties rose by 1.4 per cent between November and January, the Scottish House Price Monitor from Lloyds TSB Scotland found.

But over the year property values still fell 4.2 per cent, making the average price of a home £155,528.

Donald MacRae, chief economist at the bank, said the housing market had also been hit by a further fall in consumer confidence.

He said the market had adjusted to the economic downturn with a halving of sales and “volatile price movement”.

Mr MacRae said: “Average house prices are now 91 per cent of their peak of three and a half years ago. Consumer confidence fell further during the last quarter of last year due to a high level of retail price inflation in excess of increases in earnings, squeezing disposable income.

“The Scottish housing market appears to have plateaued in both sales numbers and price movements. There is no sign of a vigorous recovery in the Scottish housing market, but equally no sign of a further precipitous fall in house sales or house prices.

“The Scottish housing market remains down but not out.”

The report said that Edinburgh saw the biggest fall in average house prices in January 2012, compared with the same month last year, falling 10.8 per cent to £188,892.

Glasgow also suffered a steep fall, down by 9.6 per cent, to an average price of £155,435.

Dundee was the only area to record a rise, up 7.8 per cent to £129,445.

Mark Hordern, of the Glasgow Solicitors Property Centre (GSPC), agreed with the report’s findings that the market had plateaued, but only in the sense that it had “bottomed out”.

“In terms of price, we now expect significant recovery and at the same time a very gradual recovery in activity into March this year, that will accelerate into next year,” he said.

“We do not think that things are going to get worse. We agree with Lloyds that the market has plateaued, but only if, when it says that, it means ‘bottomed out’.”

The last price monitor report had indicated that Edinburgh, Aberdeen and the North of Scotland had shown growth, but Mr MacRae said at the time that there was still a “flat overall economic outlook”.

Mr Hordern questioned the accuracy of the Lloyds TSB reports because of the method that was used to calculate their figures. He said the practice of incorporating prices from earlier in the property cycle had the effect of smoothing out the impact of significant short-term changes, giving what he believed was an inaccurate picture of the current property market.

He added that while January and February were traditionally quiet times of the year for house sales, the market was already beginning to see a return of confidence among buyers.

He said: “Though it’s just the last six weeks, we have seen sales markedly higher than they were last year.

“There has been a definite change in buyer attitudes.”