City Guide to Edinburgh, Scotland

City Guide to Edinburgh, Scotland

ESPC Sees Flat Property Market In 2010


By edg - Posted on 08 March 2010

The Edinburgh Solitors' Property Centre, Edinburgh

The average house price in Edinburgh rose by 2.8% annually last month, according to figures from the Edinburgh Solicitors Property Centre (ESPC). The average price of a property sold during February stood at £200,126, up from £194,678 during the same month last year. The rise marked the sixth time in the last seven months during which an annual increase had been recorded in the Capital.

The ESPC says that there was a quiet start to the year with extreme weather conditions played a part in deterring buyers and sellers, but February saw a significant increase in activity. Over 250 sales were completed during the last month, more than 20% higher than in February 2009. Meanwhile over 700 properties were brought to the market for sale – more than twice the number in February last year – as more sellers were tempted back to the market.

David Marshall, business analyst with ESPC, says February reflected the housing market's “steady recovery", with prices holding and activity rising.

"The upturn in properties coming onto the market is particularly heartening, as an increase in supply will help to prevent house price inflation reaching unsustainable levels.”

While the ESPC sees activity likely continuing to increase during 2010, it expects prices to remain largely unchanged over the course of the year.

David Marshall explained: “While we have seen substantial improvement in the market over the last six to twelve months, it’s important to put this in some sort of perspective. The growth we have seen has come from a very low base. Lending criteria remain a constraint for many buyers, especially those looking to get on the ladder for the first time, so people shouldn’t expect property values to rise markedly during 2010. This should not be a major issue as feedback from ESPC member firms is that buyers and sellers today are generally approaching the market with realistic expectations on property prices."

The Nationwide recently reported that UK house prices fell month on month by 1% to an average £161,320 and the Halifax House Price index recorded a 1.5% fall to an average £166,857 for the same period. Snowy weather and expiry of stamp duty holiday were seen as factors in the drop.

"Too early to say whether February’s drop is start of a new trend," concluded the Nationwide.

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What about inflation? There's house price inflation and there's plain old inflation. Apparently we don't have inflation in this country - the Bank of England keeps telling us as the CPI inflation rate of 3.5% (source: ONS) is an anomaly and is going to come down. When you look at the state of the British pound if anything it looks like inflation will pick up unless the bank puts interest rates up sooner rather than later. Maybe taking on a big chunk of debt to buy a property doesn't look so stupid now if we enter an era of hyper-inflation in the UK? Maybe the banks wont lend to more would-be home-owners because - with interest rates being so low - they see themselves being on the wrong side of the deal? Remember what happened with tracker mortgages?

It may sound perverse to cheerleaders for the property market like David Marshall and the ESPC, but if you have higher interest rates (which creditors are holding out for) then lending might start again. By advocating low interest rates and complaining about the lack of lending, the ESPC sounds like it wants to have its cake and eat it. On the plus side for the ESPC and others in the property game, foreign investors have piled into the UK property market thanks to the 30-40% drop in the pound in the last 3 years or so. Britain is on sale.