Scottish Property News

Green shoots spotted in Scottish housing market

With some 60% of Scottish households owner-occupied, it goes without saying that the health of the property market plays a vital role in propping up the rest of the economy. Falling prices dented consumer confidence and curtail high street spending, prompting desperate discounting by retailers, which led to lay-offs and even closures.

On the flipside, unemployment and job insecurity - combined with an apparently declining market and expensive mortgages - put first-time buys or property moves on the backburner, sending house prices spiralling further into decline. And so it goes on.

A recovery in the property market should, therefore, be a symptom of a recovery from the recession. Whether we really are there, or even nearly there, yet, is still up for debate.

At face value, the figures for Scotland don't look promising.

On average, Scotland has seen 6.5% knocked off its national average house price.

All but four local authority regions have seen their average residential property prices fall in the past 12 months, from just 0.6% in Argyll and Bute to a dramatic 13.9% in worst-affected, Western Isles, where house prices have plummetted from £101,916 to £87,772.

Only Clackmannanshire, South Ayrshire, Orkney and Shetland have seen their average property prices increase between April and June 2008 and the same period this year.

The number of transactions across the country has almost halved in the past 12 months, down by 47.8%. But in West Dunbartonshire, Angus, and - despite its 2.5% house price increase - Clackmannanshire, property sales fell by more than 60% in a year. The housing market in the Shetland Islands has held up best of any local authority, but even there sales volumes are down by more than 25% year-on-year.

There were mixed fortunes for anyone trying to sell a detached property, on the one hand having to contend with the steepest drop in value - 10.3% -but arguably still enjoying the greatest demand, with a fall in sales of just 44% compared to almost 51% for flats.

However, the delay - about three months - between the completion of a property sale and the registration of that sale, has caused several market-watchers to claim that yesterday's RoS report does not paint an accurate picture of current market conditions which, if not quite buoyant, are improving.

"There are definitely green shoots - the decline has stopped, and there is a gradual improvement, " says Mairi Eckford, managing director of Countrywide estate agents in Scotland.

She believes slowing decline in house prices, and the increase in the average house price from a low of £136,192 in March to £150,214 last month, will prove to be the start of a "steadying and sustained recovery".

Countrywide has seen viewing go from 1000 per week in 2007, to just 250 a week in March 2008, to their current levels of 600 a week which have been "fairly steady" since March this year.

"The penny is beginning to drop that if you're moving in the same market you are getting more for less. The significant figure is the difference: if the market you're moving in is 10% down, then you might get £90,000 for your house instead of £100,000, but if you're buying a £200,000 property, then you're getting it for £180,000 instead.

"You're saving £10,000 and taking out a mortgage based on £180,000 instead of £200,000. So the move is more affordable for some people; if you're in secure employment, then the penny is dropping. And there are some very attractive properties on the market."

Only last week, she said, one property in Clarkston, which the estate agent might have expected only one, or possibly two, offers on, sold above its asking price with 11 offers on the table. Another house in the same area is set to go on sale later this month, and already there are 10 clients interested.

Dundee is seeing a similar upturn. George Solley, director of property sales for the city's Thornton Law, told The Herald: "We are finding that there has been a refreshing change. It's not just about house prices, but what's in the mix. Last year, we were really on pushing low value sales but now we are seeing higher value properties starting to sell again.

"Buyers are starting to realise that we're bumping along the bottom now and they are returning to the market. Sellers are being a bit more realistic about sales in the higher to middle market."

He added: "There are plenty of willing buyers and plenty of willing sellers, and if the mortgages were there, sales would be going like a train."

Among the most striking figures to emerge from yesterday's report was the fact that cash-sales have accounted for almost half of all property transactions in 2009, at 45%. Compared to the 20% the Halifax's Martin Ellis described as the "norm" and a "historic figure" of 30% quoted by the RoS (this is the first time they have collected specific data on cash-sales), it seems that cash is king in the current market.

"Cash sales wouldn't surprise me, " said Mr Solley. "Investment-minded buyers are looking to make a profit and get a better return on their cash than they would elsewhere - in savings, stocks, shares and the like.

"They are looking for a bargain, buying up newbuild stock and getting it below the mark, so it doesn't surprise me that those with cash are calling the shots."

Joyce Watt, branch manager for Corum in East Renfrewshire has had four cash buyers in recent months: one who had come into an inheritance, two borrowing money from their businesses, and one client swapping properties of comparable value.

Gary Thomson, managing director of Clyde Property, said: "There are a number of people and investors with cash coming back into the market because maybe they're not comfortable putting their money into the stock market or shares, so they are putting it into bricks and mortar instead.

"And that is going to be one of the best places to put it over the next five years. Not necessarily in the UK as a whole, but certainly in central Scotland."

The full Registers of Scotland report is available as a PDF here