Scottish property prices take an unexpected downturn
Scottish house prices fell by an average of £1,724 in August, the steepest monthly fall since March 2009 with exceptional wet weather affecting the real estate market.
Prices have now fallen by 2.1% compared to August last year but Edinburgh is bucking the trend with prices up £4,896 in the past 12 months, according to the latest LSL/Acadametrics housing index.
‘The headline figures suggest the housing market is slipping back into the deep hole it found itself in during 2009, but it isn’t time to start ringing the alarm bells just yet. There were freak factors in play over the summer which affected August prices, various summer events and the torrent of rainfall,’ said Richard Sexton, director of e.surv chartered surveyors, part of LSL.
‘The market hasn’t suddenly become a lot weaker. First time buyer numbers are up 9% so far on last year, demand is still strong, and high loan to value mortgages are more widely available. August should prove to be just a blot on the copy book of recovery,’ he explained.
He pointed out that areas of Scotland were deluged with twice the normal amount of rainfall, which discouraged plenty of second time buyers from going out and viewing properties. And the Olympics took up people’s spare time.
‘Lots of potential buyers will have put their property search on hold for a few weeks and used their leisure time to watch the sport. This may be why sales were down 6% on July. In the longer term, the feeling around the market at the moment is one of cautious optimism,’ said Sexton.
‘This year has seen a tentative recovery in first time buyer numbers. But it is a fragile recovery which could easily be shattered by a sharp downturn in the economy. And if the Eurozone crisis flares up again mortgage lenders will have their hands burnt, which will make it much more difficult for first-time buyers to get a mortgage,’ he added.
Peter Williams, housing market specialist and chairman of Acadametrics, also pointed out it is too early to judge the situation based on only one month’s data. ‘Over the last three years the trend has been a very gentle decline in prices down from £148,000 to £147,000, albeit with a number of seasonal peaks and troughs over that time. The unusual factor this year is that August does not represent the peak price for the year, which occurred in July on a non-seasonal basis,’ he explained.
‘We rarely publish non-seasonally adjusted prices, as we believe that housing trends are clearest when looking at seasonal behaviour over the years. However the seasonal weather pattern this summer has been abnormal and this, together with the Olympics, has produced behaviour which does not conform to what we might normally expect. It will be interesting to see if more traditional buying patterns are reflected in the movement of prices and transactions next month,’ he pointed out.
He also added that the fall in monthly prices, along with the decline in the annual rate of house price inflation, point to a slowing market at a time when both the UK and Scottish governments are trying hard to induce new levels of activity and confidence.
‘The Funding for Lending Scheme (FLS) promoted by the Bank of England should result in a greater supply of cheaper mortgage funding. This in turn should stimulate transactions and prices, not least because supply remains constrained,’ said Williams.
‘However, there is little in recent figures to support any strong optimism about the market, with a clear consensus indicating that it will remain subdued for the rest of the year,’ he added.
Although average prices have fallen over the year by 2.1% in Scotland as a whole, in individual areas there is a range of price movements from a rise of 14.4% in Eilean Siar to a fall of 12.9% in West Dunbartonshire. Of the 32 local authority areas in Scotland, 10 have seen prices rise and 22 have seen falls over the year. Last month, the equivalent figures were 12 with rises and 20 with falls, suggesting a further deterioration in the market this month.
The two local authority areas with the highest price increases over the year to August were Eilean Siar and Clackmannanshire. However these two areas are amongst the lowest by number of property sales per month, ranked lowest and fourth lowest respectively. Consequently it only takes one or two high value property sales to put these locations at the top of the table.
The area with the largest decline in property prices is West Dunbartonshire, down 12.9%. Williams said that on investigation it is clear that this fall in prices has more to do with an exceptional August last year, when two properties in the area were sold for prices at the top end of the Scottish market, rather than a serious decline in the prices currently in the area.
‘Despite a weak August, sales for the first eight months of this year are up 6% on last year. Detached properties have been the most popular purchase, with the number of transactions up 9% compared to last year. Following this, flats and terraced properties both show an increase of 4% in the numbers sold, with semi detached homes seeing a smaller rise, only up 2% on last year.
The pattern is similar in England, where the number of semi detached properties sold over the summer has fallen by 5% compared with 2011.