Edinburgh House Market Cools - Price Inflation Lowest In 15 Years
Figures released today by Edinburgh Solicitors and Property Centre (ESPC) reveal the housing market in Edinburgh has continued to cool with annual inflation falling to its lowest level since 1993. A rise of just 1.2% took the average price in Edinburgh from £207,669 in the first quarter of 2007 to £210,123 during the first three months of 2008.
The figures come just days after an International Monetary Fund report suggested that Britain may suffer a US style housing crash that takes up to 30% off current house prices. However, the ESPC suggests that with a comparatively low year-on-year sales drop in Edinburgh of 6.7% (from 1,721 sales in 2007 to 1,606 in 2008), the capital "should be well placed to avoid the downturn in prices projected in England and Wales."
Properties rose in many areas of Edinburgh. First-time buyer properties were still buoyant with 1-bedroom flats in Leith Walk/Easter Road and Gorgie/Dalry rising above trend with 4.9% and 8.9% price increases. Larger suburban houses continued to outpace the rest of the market with a 9.4% rise in 3 bedroom semis and a 13.8% rise in 4-bedroom detached properties. Illustrating how mixed the market has been from area to area in Edinburgh, 2-bedroom flats in Marchmont dropped 5.3% to £260,000, while city centre properties gained 3.3%.
"As expected, we are now seeing growth in the Capital fall to considerably lower levels than those witnessed in previous years," said ESPC chief executive Ron Smith. "The figures within the Capital are fairly reflective of a static market, with slightly higher levels of inflation being reported in some areas, and slight falls being witnessed in others."
Smith attributes the cooling to a reduction in affordability and tighter lending conditions for home-buyers. "The credit crunch has also meant that buyers are finding mortgage deals may be more expensive than at this time last year which puts a further constraint on demand. Overall we are likely to see the current situation continue throughout 2008, with inflation in Edinburgh over the year projected to stand at around 2 to 3%. More affordable areas outwith the Capital are likely to fare slightly better, with growth across East Central Scotland expected to be in the region of 3 to 5%."
Robin Stimpson, ESPC chairman concluded: "Over the last few years consistently high levels of growth have meant some people started to consider inflation in excess of 10% to be the norm. Clearly this is not the case, and that rate of inflation simply would not be sustainable over the longer term. The credit crunch has certainly had an impact on demand, but the market was due to see a period of stability, and these figures are largely reflective of that."
With literally hundreds of mortgage products being removed in recent days, the ESPC data suggests that the worst is still to come for home-owners. The Halifax latest report says prices fell South of the border by 2.5% last month, the biggest monthly fall since the 1990s.
While the Edinburgh house price inflation is generally slowing several observers indicate that the effects are very 'patchy' with the worst effects being felt in the lower priced houses where large mortgages are required. Although higher priced properties are moving more slowly there is still a strong demand for high quality and high priced properties. As one commentator explained, "there are only a finite number of Georgian properties in the New Town and these continue to command good prices are they are always in demand and relatively few come on to the market."
With CPI inflation officially around 2.5%, Edinburgh's house price "rise" of 1.2% is in fact a fall in real terms.
You are wrong,
-2.5% is only during March. where the "rise" of 1.2% is over the past 3 months.
If you want to be more accurate:
"For the first three months of the year, the Halifax said prices fell by 1.1% to a UK-wide average of £191,556, according to its data."
Which means:
UK -1.1% which Edinburgh +1.2%.
It seems to me to be pretty straight forward
Price is determined by the interaction of supply and demand.
Unless you have other evidence the supply of housing in edinburgh has not changed much in the last 3 months, nor is it likely to fall much in the next 12 months.
Demand is a function of buyers willingness and capacity to buy.
Their capacity to buy is a function of their capacity to get a mortgage.
The mortgage market is collapsing. As you read this piece no doubt some lender somewhere in the UK is withdrawning its mortgage from the market.
These mortgages ain't gonna be coming back anytime soon.
Same supply & reduce demand = falling prices from land's end to john o'groats.
The time for estate agent bs about "edinburgh is different" is gone.
This is the titantic and were going down.
If you read the article you'll see that these are year-on-year figures comparing prices in Q1 2007 with Q1 2008, not monthly as you suggest:
"A rise of just 1.2% took the average price in Edinburgh from £207,669 in the first quarter of 2007 to £210,123 during the first three months of 2008."
CPI inflation over the last two years has been around 2.5% - sometimes more and sometimes less. It hasn't been less than 1.2% over the last couple of years.
So house price inflation isn't keeping up with inflation.