House price warning for Scots as regional variations mask stagnation in market

SCOTTISH homeowners were last night warned they are not immune to the global credit crunch and will face tough times for at least a year – despite figures showing the country is the only one in the UK to buck a national house price slump.

According to research from the Nationwide building society, prices north of the Border are continuing to rise – due in part to the oil price spike fuelling the Aberdeenshire market – while the rest of the UK is crippled.

But experts told The Scotsman the figures masked a stagnation in property prices as consumer confidence faltered in the face of the credit crunch.

The Nationwide survey showed Scotland had an annual rise of 0.6 per cent, although prices had fallen 1.8 per cent in the last quarter. UK-wide, it showed annual house price inflation at its lowest since the crash of 1992. Value has fallen for the eighth consecutive month, wiping £13,629 off the average price of a home since last October's peak.

The bank said the picture in Scotland was brighter because the market had not initially swelled so exponentially north of the Border, and the oil price boom had driven demand in the North-east.

But Jamie Macnab, head of agency for property specialist Savills Scotland, warned against complacency.

"A lot of people say Scotland will get away with the property recession," he said. "I just don't see how that can be true when the market in the whole world is falling. What we can hope for is that Scotland will see smaller price falls than the rest of the UK, and a more rapid recovery, but we definitely face a drop."

He said sellers would have to consider dropping their price expectations, as this was the only way to counter stagnation in the market.

"We need the uncertainty to work its way through the system, for banks to stop announcing rights issues, and for credit to return," he added.

Meanwhile, separate figures released by Glasgow Solicitors Property Centre show the west coast boom has come to an end – although the organisation claimed the region was unlikely to face a slump on a par with the rest of the UK.

The average price of a home in the area is now about £146,500 – £300 above that recorded at the end of June last year. Prices in Glasgow now average £155,300 – £700 higher than 12 months ago.

GSPC's chairman, Michael Samuel, admitted the market had "slowed markedly this year" but said there was "still a keen interest in moving home".

Carolyn Campbell, a senior sales negotiator with the estate agency Strutt & Parker, which is based in Glasgow, said sales in the region had slowed dramatically.

She predicted "uncertainty in the market" for at least another year and called on banks to look again at their lending criteria to encourage movement in the market.

But Fionnuala Earley, Nationwide's chief economist, said Scottish house prices had "already proved more resilient than prices in other UK regions during the first quarter" and this had continued.

She said it was mainly down to better affordability north of the Border but added. "Nonetheless, Scottish prices have not been immune to the overall downturn in the UK housing market, and have now shown quarter-on-quarter declines for the second quarter in a row."

The price rise brought the average cost of a home in Scotland up to £149,541, with the capital remaining the most expensive and the south the cheapest.

Aberdeenshire and Moray had the strongest increase, while Renfrewshire and Inverclyde had the weakest.

However, Aberdeen University sociologist Dr John Bone, who has been exploring the housing issue, said: "As far as the North-east is concerned, we appear to be at a stand-off period, where the number of properties for sale is rising but sellers are not yet willing to accept that the boom is over. Scotland, including the North-east, followed the south into this boom, but cannot escape what is happening nationally."

The Nationwide figures were released a day after the Bank of England revealed that mortgage approvals for house purchases had slumped to a record low, suggesting there are further falls to come. Economists branded the data "dire" and said it suggested the picture was worse than previously feared.

Experts give their top 10 recommendations for weathering the storm

1 Ron Smith, chief executive, Edinburgh Solicitors Property Centre

Arm yourself with information on how the market is performing for the sorts of properties you are looking at, as well as the area in which you want to buy. National averages often don't reflect local trends and it's important to understand what's happening locally.

2 James Jopling, head of campaigns, Shelter Scotland

Do not bury your head in the sand if you face trouble paying for your home. Talk to your lender, or advice bodies about, for example, repayment plans, or applying for the state-run mortgage rescue scheme.

3 Sarah Stanger, sales and marketing director, Cala Homes East

Get a good financial adviser and get your finances in place so you know what you can afford and have a realistic value of what you are selling. Then go for a reputable lender who will give you a good deal.

4 Alasdair Humphery, director of capital markets, Jones Lang LaSalle

Sit tight and weather the storm. We are in the middle of a market correction with some sectors such as retail and shopping centres being the first to feel the pain. There may be opportunities for investors to take advantage of the falling value of commercial property at the end of the year.

5 Nikki Swain, property sales manager, Pagan Osborne

Find a proactive estate agent who will work with buyers and sellers, keeping in touch and matching people to potential properties, rather than just processing the paperwork.

6 Mark Hordern, marketing manager, Glasgow Solicitors Property Centre

When you are making your choice – and there is plenty of choice out there – don't be put off by superficial factors such as the decor. Instead, concentrate on factors that are impossible or more difficult to change such as location and size.

7 Scott Brown, estate agency partner, Warners

This is the time when first-time buyers should be looking to get their feet on the property ladder.

The market is remaining steady, but there are currently more people selling than buying, so there is a wider choice of properties on offer.

8 William Frame, chairman, Braemore Property Management

For investors, this is a great time to be buying property as there are fewer competitors in the market and sales are unlikely to go to a completion date. In some cases, you could even secure a property at a discounted price, which is a real incentive to those looking at a long-term buy-to-let venture.

9 Alison Burns, director of network mortgage sales, Lloyds TSB

Putting off plans to re-mortgage is a false economy and this new breed of "wait and see" homeowners could end up costing themselves more in the long run.

Sitting on your standard variable mortgage rate is never the best option, so my advice would be to start shopping around well before your current mortgage deal expires.

10 Stuart Black, head of sales and marketing, Knight Frank

In an uncertain market, the best advice both to those who are looking to sell their property and those who are looking to purchase, is to be patient and not to panic.

Granite City heats up a market that's cooling down

RISING world oil prices have buoyed up the property market in Aberdeen and surrounding areas and have helped protect Scotland from the UK market downturn.

The Granite City was the fifth "hottest" major city in the list – the only Scottish mention in the rankings. Homes there sell at an average of £225,124 – an increase of 153 per cent in a decade – and in Aberdeenshire and Moray the price has increased 162 per cent to £165,600.

Denise Merson, head of residential services in Ledingham Chalmers, said there had been a 21 per cent year on year increase of hits on the Aberdeen Solicitors Property Centre website.

"We have a good economy in Aberdeen and a lot of job security, and earnings are higher here," she said. "It means this area has been more cushioned. That's not to say we are immune."