Scottish Property News

Scots housing market recovering

Scotland’s housing market is picking up, but at a much slower rate than the rest of the UK, according to new figures.

Although the last three months of 2009 saw a 4% increase in loans to buy homes in Scotland, this rise was dwarfed by the figure of 9% in the rest of the country, said the Council of Mortgage Lenders.

It reported there were 14,200 loans to buy Scottish homes in the fourth quarter of last year, a 5% increase in value on the previous three months and a 4% rise in number.

However, the market in England sped up by 9% over the period, with a 62% increase year on year compared to just a 22% rise in Scotland, where the housing market downturn began later and has been slower to recover.

The slow uptake in the run up to Christmas meant that just 8% of all loans were in Scotland, the lowest share of the UK market in nearly three years.

For the year as a whole, the total number of mortgages given out in Scotland was almost a quarter lower in 2009 than it was in 2008, and at just 47,000 it was the lowest total yet encountered in the 16 years that the body has kept records.

The number of first-time buyers remained unchanged at 5,400 in the three months to the end of 2009, it found. The figure is generally seen as an indicator of confidence in the economy and the housing market in general, and the fact that it did not fall will give some comfort to the industry.

The total value of lending to first-time buyers grew slightly because the average individual loan rose, with £479 million handed out compared to £474m in the previous three months.

However, the Council of Mortgage Lenders warned that many Scottish borrowers will find it difficult to access good deals, which are normally only available to buyers with large cash deposits.

A rebound in prices, however, and some relaxation of lending criteria mean that the situation should ease through the course of 2010, with a real improvement likely by the end of the year.

Despite the longer-term prospects looking up, Kennedy Foster, the council’s Scottish policy consultant, said factors as diverse as the cold snap and the reintroduction of stamp duty could continue to hinder the market in the immediate term.

“We do not anticipate an increase in lending activity immediately. Funding conditions remain challenging, economic recovery is fragile both in Scotland and in the UK as a whole, and with little likelihood of interest rates rising this side of an election, many on low variable rates have little incentive to remortgage,” he said.

“A combination of bad weather in the early part of the year and the end of the stamp duty holiday will also have affected housing market activity, and will reinforce the slow start to 2010.

“However, the situation is much improved on a year ago, and a gradual improvement in market conditions and the wider economy should support a modest increase in activity later in the year.”

The number of people remortgaging their homes remained low across the UK, the figures showed, with just 9,000 such loans north of the border. Over the whole 2009, there were only 39,000 remortgage loans, worth £4.4 billion, compared to 74,000 worth £7.4bn in 2008.