House prices rise in Scotland despite drop in demand

It’s a combination that traditional economics says should never really happen, but happen it has. In a report released in September by the Royal Institute of Chartered Surveyors (RICS) it’s been found that house prices in Scotland have continued to rise despite the fact that there have been fewer enquiries than in previous months.

The figures speak for themselves, 33% more respondents than previously reported an increase in prices and 14% more predicted that they would continue to rise.

RICS’ Chief Economist, Simon Rubinsohn, commented on the figures by saying, “The UK market does now appear to be settling down following the significant headwinds encountered through the spring and summer. Buyers do appear to be returning, albeit relatively slowly, but the big issue that continues to be highlighted by respondents is the lack of fresh stock on the market, which has been evident in Scotland over the last year”.

It’s more than possible that it’s the demand that’s outstripping supply that’s seeing Scottish property prices continue on the upward trend that they’ve shown all year – a total growth of around 4.3% over the last 12 months.

In findings released by the Council of Mortgage Lenders they put forward the theory that the first-time buyers’ market is a key driver as the relatively low cost of property in Scotland makes it more affordable than in other parts of the country. It’s this pressure at the bottom end of the market that serves to fuel it at every level. PWC have seen prices in Scotland continue to rise, albeit at a modest level compared to the rest of the UK, but do expect this increase to slow down to closer to 2% in 2017.

It’s impossible to review just one region in silo, given the interconnectivity of financial, and housing markets. Looking at the UK as a whole, all the latest surveys have found great differences from region to region. With the changing laws relating to Stamp Duty (the English equivalent of Land and Build Transaction Tax -LBTT-), which saw all bands rise by 3% in April of this year, locations like London have seen falls in property prices. In the English capital this has meant a dramatic collapse especially in the ultra-high end market involving properties costing £10 million or more which has seen a massive 86% fall over the last year – though the effect on the overall market is likely to be limited, as can be viewed in the prices of the Scottish market.

With encouraging news from locations such as Finnieston (Glasgow) becoming one of the UK’s hipster hotspots, and Thorntonhall (South Lanarkshire)  highlighting a continued demand for property sales in Scotland, the outlook remains positive in light of difficult market pressures. There are significant pressures put in place with volatility in the market, however given the current lack of insight into the true effects of any political decisions still remaining unclear, it’s difficult to truly forecast growth with any degree of certainty.

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