• Share
  • RSS
  • Print
  • Comments

Month-to-month increases in property sales led many to believe the Scottish real estate market was ready to get on the mend, but new numbers show that the activity was an advantageous reaction by landlords to low prices rather than a boom in first-time buyer activity. Now that the buying spree is over and the year’s stats are available is appears prices have fallen 3.7% and there has been no gain in first-time buyer activity over 2010. The situation is not primed to improve, either, as lending restrictions keeps buyers out of the market and consumer confidence dwindles. For more on this continue reading the following article from Property Wire.

Residential property prices in Scotland have fallen by 3.7% annually, the largest decline since November 2009, according to the latest LSL/Acadametrics Scotland House Price Index published today (Wednesday 19 December).

It means that home prices were £5,458 down in October but on a monthly basis prices were down just 0.8% taking the average house price to £142,246.

The data also shows that October saw the strongest October for sales since 2007 with transactions some 24% higher than in September.

‘At first glance, sales increasing by almost a quarter between September and October looks very encouraging, suggesting more lower income buyers are finally getting a foot on the property ladder,’ said Richard Sexton, director of e.surv chartered surveyors, part of LSL.

But he pointed out that is actually a spurt of activity from residential landlords that drove the increase. ‘Terraced property and flats are particularly cheap by historic standards, largely because the first time buyers who would typically buy them can’t get a mortgage, so landlords are taking advantage and snapping them up at bargain prices,’ he said.

He also pointed out that over the longer term, prices have been dragged down by over £5,000 over the past year because the property market is riddled with chronic structural defects that have persisted, and in some cases worsened, since the financial crisis.

‘Mortgage finance is painfully restricted. Disposable income is low. And consumer confidence has been cut to ribbons. High LTV lending has dried up compared to its historic levels, which has slashed first time buyer numbers to less than half the level before the financial crisis because new buyers simply can’t get the finance they need to buy their first home,’ explained Sexton.

‘First time buyer numbers so far this year are 10% higher than they were this time last year, but exactly the same as they were in the equivalent period during 2010, which was hardly a strong year. It’s certainly far too early to start proclaiming a sustained improvement in first time buyer activity,’ he said.

‘But it’s not all the fault of banks by any means. Lenders are hamstrung by stringent requirements on the amount of capital they have to hold in reserve. Ostensibly, this is supposed to prevent the 2008 financial crisis becoming Groundhog Day, but in practice it is preventing banks from increasing their lending, particularly to first time buyers who require high loan to value mortgages,’ he added.

On a regional basis there is usually plenty of volatility in prices, but the data shows that since last October virtually every region across Scotland has seen prices fall. Even Edinburgh which should be more immune to house price falls thanks to the higher number of wealthier buyers who live there has seen prices fall by 3.6%.

The largest monthly fall in October by local authority area was in Clackmannanshire, down 11%. This area has a low volume of monthly sales, however, so the price movements are consequently more volatile than most. The second largest monthly fall was in East Lothian, down 4% over the month. This was due to the average price of flats and terraced properties falling by 30% each.

In terms of annual price change Clackmannanshire also had the biggest fall, down 26% on the year. The area with the highest growth in house prices was East Dunbartonshire, up 9% over the year, largely on the back of an increase of 17% in the average price of semi detached properties.

This article was republished with permission from Property Wire.