Sellers urged to lower expectations as market stalls

Sellers are coming under growing pressure to lower asking prices after buyers deserted the Scottish housing market last month.

Home sales in Scotland slumped in June as the summer lull started earlier than usual, according to the latest monthly survey by the Royal Institution of Chartered Surveyors (Rics) Scotland, out today.

With sellers still putting homes on the market even while buyer numbers fall, surveyors say prices are falling - and are likely to continue doing so.

The downbeat report contrasts with new Council of Mortgage Lenders (CML) figures showing an improvement in lending in May.

There were fewer inquiries from buyers than in any other month this year, according to surveyors, with the summer slowdown starting early. Sales levels also fell in a month that is traditionally among the busiest, the survey found.

But while buyers stayed away as confidence continued to drain from the market and the wider economy, sellers continued to put their homes on the market. And with buyers increasingly outnumbered by sellers, homeowners are coming under pressure to revise their price expectations.

Grant Robertson, of Allied Surveyors in Glasgow, said agents were already encouraging sellers to lower their prices as the market slowed down.

"This reflects last year's model, when activity in the first two quarters failed to carry into the second half of the year," he said. "The process has, however, started earlier than before and a further reduction in values seems inevitable now."

One in four homeowners is making home improvements before taking out a home report in an attempt to boost their chances of selling, surveyors reported, with homes in good condition selling more easily than those needing work. Yet surveyors said the only buyers being considered seriously were those who had sold their own home or had arranged a mortgage.

A quarter of Scottish surveyors reported a fall in house prices last month, with 71 per cent saying they stayed the same and just 4 per cent seeing an increase. The decline in Scotland mirrors the situation across the UK, with only London bucking the trend.

Graeme Hartley, director of Rics Scotland, said: "The traditional 'summer holiday' for the housing market came early for Scotland, with fewer buyers around and less sales.

"But because property is still coming on the market, buyers are in a good position to negotiate. With continued uncertainty over the jobs market and the economy, this subdued picture is set to continue."

The market slowdown in recent months is also reflected in lending figures published by the CML yesterday. Lenders advanced 41,500 house purchase mortgages last month, up by just 700 from April, when activity in the housing market was disrupted by successive Bank Holiday weekends.

It was the second-lowest May figure since the CML began collecting the data nine years ago, and down from the 43,800 loans given last May.However, Michael Coogan, director-general of the CML, predicted an improvement in lending levels over the coming months.

"There is no evidence of any drastic changes on the horizon, or any significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year," he said.