SCOTTISH house prices will fall even harder and faster than predicted, leading forecasters warned last night.
Capital Economics said it now expected properties north of the border to lose 12% of their value this year and another 15% next.
The research giant, one of the most respected firms of market analysts in the UK, had previously predicted a more mode
st decline of 10% in 2008 and again in 2009.
The new, revised forecast would see Scotland's average house price tumble from an official £158,360 in 2007 to just £121,145 in 2009.
Seema Shah, one of the firm's analysts, said house prices had been over-valued by massive increases seen during the past decade. Therefore, large drops would be an obvious consequence.
She said: "Just to bring prices down to the kind of level we would regard as value for money would take that kind of magnitude of fall."
The decline, however, will still be far less steep than in England, Wales and Northern Ireland, with Capital Economics predicting UK house prices to plunge 35% over this year and next.
One of Scotland's leading analysts yesterday also came up with new and gloomier forecasts for Scottish house prices. John Boyle, of Edinburgh-based DTZ, had expected properties to lose 5% of their value between the summer of this year and the summer of next. Now he believes the figure will be between 5% and 10%.
Boyle, who has traditionally been more optimistic than Capital Economics, changed his mind after weeks of chaotic crashes on international financial markets and an increasingly bleak picture emerging of economic fundamentals.
He said: "My prognosis must become much gloomier because unemployment has gone up quite suddenly. It's still lower in Scotland than in England, but that will affect of the overall affordability of homes.
"The big caveat, however, is that there is a huge variety of patterns in house prices across the country. House price forecasting can be a pretty tricky proposition."
Scotland's official Government house price figures are traditionally published months in arrears and have still to catch up with the some of market misery that saw the volume of sales halve from the same period of 2007.
Nationwide, one of the country's biggest building societies, this month said an average of £8,000 had dropped off the price of Scottish homes over July, August and September. That was the steepest decline on record. Average Nationwide house prices in September 2008 were 7% lower than a year before, just before the credit crunch that has sparked the current economic turmoil.
Scotland's two biggest groups of house sellers reported similar figures for the third quarter. Glasgow Solicitors' Property Centre (GSPC) said average prices in the country's biggest city were down 8% at £142,500. Its Edinburgh counterpart, ESPC, said its average was down 7%.
Headline figures, however, continue to mask huge variations, even within a single city, market watchers warned.
Mark Hordern, of GSPC, said new-build two-bedroom flats in the centre of Glasgow were now "real bargains", selling at £150,000-£200,000 compared with pre-crash prices of up to £275,000. But he said homes in established, popular neighbourhoods – close to good schools – could still command far higher prices. Although there is still plenty of room to haggle, he said. "This is a buyers' market," Hordern added. "Nobody is going to be offended by a low offer."
The number of actual sales recorded by GSPC and ESPC are running at half the level of a year ago, with the number of properties on the market up 50% on 2007. There are more than 6,000 houses for sale through ESPC, which covers much of central eastern Scotland, and nearly 4,500 in GSPC, which deals with much of Strathclyde.
There has, however, been a huge change in the way homes are being offered for sale. ESPC said 52% of the properties on its books were now at fixed price, up from little more than around 25% a year ago. GSPC said nearly half its properties were at fixed price as sellers shun the traditional Scottish "offers over" system.
David Marshall, of ESPC, said: "Two-thirds of homes advertised at fixed price are actually selling for less than the asking price."
He added that recent market turmoil had still to have an impact on the Edinburgh housing market, where prices and volumes in October appear to be running at the same kind of level as in September.
Capital Economics, meanwhile, has some good news. Scotland, the firm believes, will recover sooner than previously anticipated from the current crisis with house prices bouncing back a single percentage point in 2010. "The sharper correction isn't necessarily bad news for the economy because we are getting it out of the way quicker," said Shah. "Some first-time buyers are quite happy that at least at some point we will get on to the housing ladder. It had just got to the point where prices were on the verge of ridiculous."
The full article contains 845 words and appears in Scotland On Sunday newspaper.
