Edinburgh's housing market may be finding its feet again, following a reduction of Bank of England interest rates to 1%, the lowest level in its 315 years, a stamp duty holiday on properties under £175,000 until September 2009, and a rapid fall in the capital's property prices by a fifth of their mid-2008 peak.
February figures from the Edinburgh Solicitors and Property Centre (ESPC) show that residential house prices and the volume of sales are still falling. But, ESPC chief executive Ron Smith still sees reason to be positive: "We are starting to see signs of more stability in property prices," he says.
Market down, outlook uncertain
The ESPC reported that Edinburgh prices fell by 2.5% annually in February taking the average price of a home in the Scottish Capital to £194,678. By comparison figures from the Nationwide Building Society show the average UK home has fallen 17.6% to £147,746 year on year in February, while the Halifax House Price index for February showed the average UK house price down 17.7% annually at £160,327.
The ESPC said Edinburgh sales volumes, which had shown an improvement in January, slowed again. A total 212 properties were sold in February, as opposed to 277 in January and 476 in February 2008.
Buyers are paying less on asking prices with the average premium on "offers over" only 4.3% (down from 23.3% in February 08). Only 19% of fixed price properties are achieving their set price.
"Whilst we are likely to continue to report year-on-year falls until August at the earliest, the average price being achieved is proving to be more settled at around £195,000. This stability is potentially further demonstrated by the small increase in time taken to sell a property," commented Smith on the figures from the ESPC's 230 member solicitor estate agents across East Central Scotland.
"An interesting factor will be how prices change over the next 5 months," added Smith.
The average selling price of ESPC properties has fallen over £50,000, or 21%, from £245,415 at the July 2008 peak to last month's £194,678.
"March onwards is when we have traditionally seen the growth in house prices take off each year," said Smith. "The question is whether we will see this seasonal bounce or if prices will remain between £190,000 and £200,000 as we have witnessed for four out of the last five months. If this is the case we will start to see some sizeable year-on-year percentage falls as we report against the peak of the market in 2008, although the average price itself may remain stable."
Deflating assets
On 5 March, the Bank of England continued its battle against the
specture of deflation - particularly evident in the sharp downturn of
the housing market - by cutting interest rates by 0.5% to a historic
low of 0.5%. It was the sixth cut in interest rates since October. The
previous low in interest rates was set when the Bank cut from 2 percent
to 1.5 percent on 8 January.
For home-owners paying variable rate mortgages, the dramatic fall in interest payments has softened the blow caused by the property market collapse. Yet, even with interest rates and property prices at these low levels the low volume in property sales suggest many would-be house buyers are still waiting on the sidelines for property prices to fall further.
Registers of Scotland figures
The Registers of Scotland, the government agency that records all property transactions, reported yesterday that The City of Edinburgh local authority area saw a fall in sales to just over £382 million in the last 3 months of 2008 - a decrease of 57.3% over the same quarter in 2007 and a decrease of 35.6% over the previous quarter (July-September '08).
The Registers of Scotland report also showed that the average house price in the City of Edinburgh for the period October to December 2008 fell 5.8% to £201,021 compared to the same period a year earlier when it stood at £213,386. Prices in the final quarter of 2008 were down 11% on the previous quarter when the average residential house price was £225,847.