Scottish property prices up by 0.1% after four months of falling values
Residential property prices in Scotland increased 0.1% in February following four months of falls but are still 1.6% down year on year, according to the latest price index.
The average house price is not £145,860 and the rise is attributed to a rush by first time buyers wanting to beat the stamp duty change at the end of March, the LSL Acadametrics Scotland House Price Index.
It also shows that transactions were 10% higher in February than they were in the previous month. At 4,422 for the month, these were up 407 over January.
‘Both the rise in the number of sales and the average price occurred against the grain of the February housing market in Scotland. Whilst, in England and Wales, January is normally the quietest month, in Scotland it is February that has seen the fewest sales in seven of the last eight years. Whereas a February transaction fall of 12.3% would be normal, the sale of 4,422 properties resulted from the sales of an extra 880 houses, a rise of 22% over the past norm,’ explained Peter Williams, housing market specialist and chairman of Acadametrics.
‘As occurred in the market south of the border and shown by the LSL/Acadametrics England and Wales House Price Index, the influence of government was at work. The March end of the stamp duty tax holiday for first time buyers brought both the small increase in demand and, in turn, the end to the downward trend in prices,’ he said.
Despite the overall rise in average prices in Scotland, prices fell in February in 21 of the 32 local authorities covered. Williams points out that although there was 29.4% rise in the average price in the Orkney Islands this was influenced by the sale of one property at £300,000 and another at £405,000. ‘Given that only 30 sales of houses worth £300,000 or more have taken place in the Orkney Islands in the last 12 years, we may regard the February boost as an effect of chance,’ he pointed out.
At £145,860, the average price still hovers close to a level last seen in December 2009. Despite the month’s overall average house price increase the average price in almost all local authorities has fallen over the past year, much in line with the fall for Scotland as a whole. Excluding the smaller areas, which are likely to reflect apparent price volatility resulting from low transaction volumes, Aberdeen stands out with a rise of 2.2%.
The index also shows that transactions have fallen over the three year period from 2009 to 2011 when compared with 2006 and 2007. ‘The main cause of this decline is the difficulty experienced by borrowers in obtaining mortgage finance, given the higher levels of deposits now required by the lenders. Unfortunately the ending of the tax holiday for first time buyers will do nothing to help restore the housing market to its previous levels,’ said Williams.
Richard Sexton, director of e.surv, said that the rush to beat the stamp duty deadline was not the only factor behind the recovery in February. ‘Banks and building societies had been tentatively increasing their lending to lower income borrowers, and introducing more mortgages which require smaller deposits. This has gone some way to banishing the concern that the increase in activity in February was largely artificial, and that prices will fall away again as the rush to beat the tax break subsides,’ he explained.
‘And, broadly speaking, mortgages have become more affordable than they’ve been at any point since the downturn, which should soften the blow of the stamp duty holiday ending. Demand is still healthy, despite tepid economic growth, and that should help support house prices,’ he added.
However, in the longer term, the outlook is much murkier. ‘The fortunes of the housing market remain inexorably tied to fallout from the European financial crisis, which could hinder banks and building societies’ ability to satisfy the high demand for mortgages. And the national average price may be masking more worrying, and volatile, regional disparities. If you delve beneath the headline figures, it is clear the housing market is still suffering in the majority of local authority areas. Prices actually fell in two thirds of all localities in February, highlighting that the recovery of house prices is still on dicey ground,’ he added.