Scottish housing market pauses for breath

The boom in Scottish house prices has come to an end according to the latest Scottish House Price Monitor from Lloyds TSB Scotland, with the first quarterly fall in the all Scotland average house price for seven years.

In the three months to 31 January 2008, the quarterly price index for the average domestic property in Scotland fell by 1.6 per cent to give an average mix adjusted Scottish house price of £163,211. On an annual basis, Scottish house prices have risen by 14 per cent.

Dundee and Edinburgh were the only two cities to record a slight increase in the quarter, with the South West excluding Glasgow the one area outside the main cities to report a small rise. In spite of quarterly falls in all other areas, house prices continue to report annual rises ranging from +5 per cent in Glasgow to +30 per cent in Aberdeen.

The North excluding Aberdeen reported very strong rises in the previous two quarters, so a fall this quarter is neither unexpected nor has it impacted greatly on the very robust annual rises in the area. However, in other parts of the country, there is evidence of the rate of increase tailing off since spring of last year.

The price movement across Scotland is composed of price changes in different property types. Flats are showing an increase of 2.1 per cent in the quarter, while all other property types show a fall in the quarter ranging from 1.3 per cent for detached houses through to a 3 per cent fall for both terraced houses and semi-detached houses. All property types however continue to report robust growth over the last year ranging from +12 per cent for flats through to +16 per cent for detached houses.

Professor Donald MacRae, chief economist, Lloyds TSB Scotland, said: “Though this is the first quarterly fall in the all Scotland average house price for seven years, all cities and areas outside cities continue to show an annual underlying price increase. The market is showing sensible adjustment after years of price gains above the rate of inflation.

“As the total population in Scotland increases with less people per household, people living longer and marital break-ups, the number of households in Scotland is projected to increase over the next 20 years. Aspirations for home ownership show 86 per cent of people would prefer to own their own house. There is enough demand for housing to put owner occupation beyond the current level of 67 per cent.

“The prospects for the Scottish housing market are for a plateauing of prices during 2008 following the significant gains in the last five years. The Scottish housing market is pausing for breath.”