LSL/ACADATA SCOTLAND HOUSE PRICE INDEX

Scottish house prices up £647 since September 2012 

Prices rise by £952 on a monthly basis
House prices in Aberdeen hit record high
Sales in Q3 2013 22% higher than last year

House Price

Index

Monthly Change %

Annual Change %

£144,253

195.6

0.7

0.5

Donald MacLellan, Chairman of Walker Fraser Steele Chartered Surveyors, part of LSL Property Services, comments: “The Scottish housing market is being revitalised: for the first time since January 2011 the annual change in prices has been positive, marking a significant step change. Stable price levels are helping the market recover; prices have risen by £952 in the past month and are £647 higher than a year ago. Sales levels are also following suit, now at their highest level for five years – a dramatic boost that is helping propel the property market upwards.

“The main driver of this increase is down to the phenomenal rise in first-time buyer activity at the lower end of the market. Lenders have eased conditions, banks are more confident and generally the mortgage market is buzzing. First-time buyers have witnessed a plethora of top mortgage deals, greater product choice, and low interest rates are giving people more confidence to buy. The Government’s launch of its own version of the Help to Buy equity loan scheme, has given the market a real helping hand.

“The general economic recovery has restored and renewed consumer confidence, and many would-be movers in Scotland are now more optimistic in their ability to sell their existing home and buy elsewhere. As a result the whole market has become far more fluid. Before the average house price of £97,000 paid by first-time buyers was lower than the average price for the market as a whole and movement at the bottom end caused prices to fall. Now it’s activity from second time buyers and other movers that is placing upward pressure on prices and this will drive the recovery forward. With sales up by 22% over the last three months compared to last year, green shoots are emerging in the property market left, right and centre.

“Before we get swept away with the positive news, it is important to stress that the Scottish property market has a long way to go. For instance, there’s the possibility that interest rates will rise and a concern that higher stamp duty on the most expensive properties could put a brake on activity. All eyes will be on the Scottish Government’s plans to focus on affordable housing across Scotland which is vital if the market is to progress further.”

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LSL / Acadametrics Scotland HPI

Scottish house prices up £1,648 in 2013
• Sales in Q2 2013 are 7.7% higher than last year
• First-time buyers accounting for a larger percentage of sales

Alan Penman, of Walker Fraser Steele chartered surveyors, part of LSL Property Services, comments: “Scottish house prices have gently taken a tumble in the past three months – the latest figures show prices fell by £627 in June compared to May. But the housing market is bearing up well under a sea of adversity. Prices are down slightly month-on-month, yet they are higher than they were at the start of the year.

“There are some green shoots of recovery, with house sales 7.7% higher in Q2 this year than the equivalent period last year. The rise in sales is powered by increased sales to first-time buyers. But homeowners and prospective buyers are wise to be cautiously optimistic. Although the availability of mortgages is noticeably better, sales levels in the first half of 2013 are still low in contrast to 2007 (only 48% of the level). Sadly there’s still an unhealthy dependency on wealthier borrowers and landlords when looking closely at sales levels.
“Without doubt, the main barrier to a full recovery in the housing market is mortgage lending, which is still low compared to its pre-financial crisis levels. The high cost of rented accommodation is a drain on personal finances, but plenty of first-time buyers have decided to bite the bullet and start saving up for the large deposit needed for a mortgage. Now the economy has crawled out of the badlands, the banking sector is improving rapidly. Lending, particularly to buyers with small deposits, has been boosted thanks to the support of the Funding for Lending and Help to Buy initiatives.
“More first-time buyer activity is needed to ensure the housing market fully rehabilitates. There is volatility in Scottish house prices depending on the distribution of the majority of first time buyers, with cities such as Glasgow and Sterling seeing significant rising prices in June, and more remote parts, such as Orkney and Falkirk experiencing the largest monthly falls in prices. The government must continue to support first time buyers, if the market is to successfully inch its way towards a more sustained recovery. As the economy expands and employment improves, the property market too will perk up.”

LSL / Acadametrics Scotland House Price Index

House prices up £2,283 since start of 2013

  • Sales 4.4% higher than May last year
  • House prices in Aberdeen hit a record high in May

House Price

Index

Monthly Change %

Annual Change %

£143,809

195.0

-0.1

-1.3

Alan Penman of Walker Fraser Steele, part of LSL Property Services, comments: “Scottish house prices have dipped slightly in the last two months. But compared to the beginning of the year, the outlook is distinctly sunnier. The average house is worth almost £2,300 more than in January. Prices haven’t increased as quickly north of the border, but the increases in England are being driven mostly by London.

“Sales are improving, and mortgages are more readily available. But there is still a long way to go. First-time buyer numbers are less than half of what they were before the 2008 downturn, and banks are still reluctant to lend en masse to high LTV borrowers. The finances of many borrowers simply don’t hold up to the strain of saving for a large deposit. Inflation remains high. Wage growth remains weak. Many borrowers require additional help to put enough money away for a deposit.

“When demand slows, house prices follow. Demand has been dampened by inaccessible mortgage criteria. But there are some hotspots, which have seen house prices rise, against the general trend. These areas are mortgage micro-climates, with job opportunities and better wages sustaining individual growth in their region. AberdeenCity is one such success story.  Prices in Aberdeen rose 5% in the last month, to a record high of £194,202. Glasgow and Edinburgh too, have seen price surges.

“Increased first-time buyers will transform the future market. In the first quarter of 2013, loans to first-time buyers were 10% higher than this time last year. At the moment, this improvement is focused in the cities, where the majority of first-time buyers are based. As government schemes like Help to Buy and Funding for Lending continue to encourage new first-time buyers to the market by supporting their efforts to secure finance, this should grow in impact. High demand for Scottish rental property will continue to feed demand for property too.”

Scottish house prices up £2,283 since December 2012

 

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Alan Penman of Walker Fraser Steele, part of LSL Property Services, comments: “Scottish house prices have dipped slightly in the last two months. But compared to the beginning of the year, the outlook is distinctly sunnier. The average house is worth almost £2,300 more than in January. Prices haven’t increased as quickly north of the border, but the increases in England are being driven mostly by London.

“Sales are improving, and mortgages are more readily available. But there is still a long way to go. First-time buyer numbers are less than half of what they were before the 2008 downturn, and banks are still reluctant to lend en masse to high LTV borrowers. The finances of many borrowers simply don’t hold up to the strain of saving for a large deposit. Inflation remains high. Wage growth remains weak. Many borrowers require additional help to put enough money away for a deposit.

“When demand slows, house prices follow. Demand has been dampened by inaccessible mortgage criteria. But there are some hotspots, which have seen house prices rise, against the general trend. These areas are mortgage micro-climates, with job opportunities and better wages sustaining individual growth in their region. AberdeenCity is one such success story.  Prices in Aberdeen rose 5% in the last month, to a record high of £194,202. Glasgow and Edinburgh too, have seen price surges.

“Increased first-time buyers will transform the future market. In the first quarter of 2013, loans to first-time buyers were 10% higher than this time last year. At the moment, this improvement is focused in the cities, where the majority of first-time buyers are based. As government schemes like Help to Buy and Funding for Lending continue to encourage new first-time buyers to the market by supporting their efforts to secure finance, this should grow in impact. High demand for Scottish rental property will continue to feed demand for property too.”

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Dr Peter Williams, housing market specialist and Chairman of Acadametrics, comments:

The LSL/Acadametrics HPI shows a small decrease of £96, or 0.1%, in the average price paid for a house in Scotland in May, compared to April on a seasonally adjusted basis. This is the second month in succession that there has been a minor fall in house prices, but overall this year prices are up by £2,283, or 1.6%, from December 2012.

Figure 1 below shows the average house price in Scotland for the period May 2012 to May 2013, again on a seasonally adjusted basis, together with a trend line over the twelve months. We see that the year can be split into three distinct periods. The first is one of a relatively small but almost constant decline in prices from May 2012 to the end of the year, with falls ranging between -0.1% and -1.0% per month. The second, from January 2013 to March 2013, shows an upturn in prices of 1.8% over this three month period. Finally we have two months of almost static prices, with the average house price falling by £250 over the period. Prices in May 2013 are above the trend line, illustrating the gains that have been made since the start of this year.

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On an annual basis, as indicated by the trend line above, house prices continue to decline, with the annual rate showing a fall of -1.3% over the year. We anticipate a small rise in prices over the coming summer months, as most estate agents are reporting an increase in demand for properties. This reflects a slight easing in the difficulties that buyers have been experiencing in obtaining mortgage finance.

In England & Wales all Regions reported a fall in the average annual rate of house price change between April and May 2013. The positive change in the annual rate in Scotland goes against this trend, albeit by the smallest of amounts at +0.1%.  Despite the fall in house prices across the regions of England & Wales, there does appear to be generally more optimism.  The main house price indices are now all pointing towards continued house price inflation, and a slow but steady improvement in the housing markets across the UK. This mimics the generally more confident views of the economy that have emerged in recent months. Mortgage lending has been boosted by a range of government initiatives, and we are finally seeing house builders moving to increase output. We anticipate that this optimism will also manifest itself north of the border, and foresee buoyant statistics for the Scotland housing market in August of this year. This is when the price falls of August 2012 will drop out of the annual calculations.

In Scotland over the year, and based on a three month average, semi-detached properties and flats declined in price by 1%, while terraced property prices have remained constant; in the same period, detached properties have seen prices rise by 1%. These price changes are at the national level. At the more local level we see far greater movement in individual prices.  Looking at detached properties, the highest price rises have been in Angus, up 19.5% over the year. For semi-detached properties both Angus and DundeeCity have seen prices rise by a significant 16% and 10%, although the largest increase was recorded in Clackmannanshire at 19%. For terraces the highest price rises have been in AberdeenCity, up 11%, while for flats the largest increase was in East Dunbartonshire, up 16%.

Last month we discussed peak average house prices and stated that AberdeenCity was close to breaking its previous record level. We can indeed advise that this month AberdeenCity has surpassed its previous house price peak of £186,917, recorded in December 2012. The current average price is now £194,202, up 5% on the month; this is the only Local Authority Area in Scotland to have set a new peak price over the last year.  Apart from Aberdeen City, the area closest to its peak price is Angus, where currently prices are £2,850, or 2%, from the peak of £143,478 established in June 2008.

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The graph above shows the number of monthly transactions recorded by the Registers of Scotland (RoS) for the period January 2007 to May 2013, without seasonal adjustment. There is a bias towards the summer months in the purchase of homes, with May typically seeing an increase in sales of 13% over April levels. This year there has been an increase of 5% in sales volumes over April, which is lower than we would normally expect. However, sales in April were more buoyant than usual, which has resulted in a lower percentage increase in sales in May. For the period from January to the end of May 2013, transaction levels are running 4.4% ahead of the same five months in 2012.

Approximately half the rise in sales to date in 2013 compared to 2012 is the result of an increase in activity by first time buyers. The CML reports that “In the first quarter of 2013, a total of 4,500 loans were advanced to first-time buyers in Scotland. This represented a 10% increase on the first quarter of 2012 when there were 4,100 loans”. There has also been a pick-up in activity by buy-to-let landlords, with rentals in most areas of Scotland remaining strong.

Given the increase in activity by first time buyers, it is perhaps not surprising that the property type with the highest increase in transactions in the first five months of 2013 compared to the same period in 2012 is terraces, up 10%. In quantum terms, the largest increase in terraces over this period was seen in Glasgow, up by 44 properties, or 12%, compared to the same period in 2012. In percentage terms the highest increase in the number of terraced properties sold was in Perth & Kinross, up 38%, or 38 properties, followed by Dundee city, up 30%, or 39 properties.

The second largest increase in 2013 by property type, compared to the same period in 2012, was detached houses, up by 7%, or 270 properties. Here the largest quantum increase in detached sales was seen in Aberdeenshire, up by 91 properties, followed by the Highlands up by an extra 63 sales on 2012 levels, an 18% increase.

As with house prices, property sales have increased in the first five months of 2013 in the majority of Local Authority areas, compared to the same period a year earlier, with 25 of the 32 authority areas witnessing rises in transaction levels. The largest percentage increase was in Midlothian where transactions have increased by 48% over 2012 – this was across all property types, but especially detached houses, which have seen a doubling in the number of properties sold. Midlothian is followed by East Dunbartonshire, up 19% in sales volumes, with the largest increases taking place in the sale of detached homes. The area with the highest increase in the sale of flats is Edinburgh, with an additional 228 units being sold compared to the previous year. This increase in the sale of flats in Edinburgh represents 60% of the additional 390 flats sold in Scotland in the first five months of 2013, compared to a year earlier.

LSL / Acadametrics Scotland HPI

 House prices climb £1,082 in March 

  • Prices rise for the third month in succession
  • Prices rise by £3,776 over 2013
  • Sales volumes increase by 8% over previous year

House Price

Index

Monthly Change %

Annual Change %

£144,615

196.1

0.8

-0.9

 

Gordon Fowlis, regional managing director of Your Move, an estate agency chain that is part of LSL, comments: 

“Although the Scottish housing market has had to battle with a lack of cheap mortgages and poor funding conditions over the last year, it looks as if the market is now sailing into calmer waters. This is thanks to the help of the Funding for Lending scheme. The positive increases in house prices for three consecutive months of 2013 are encouraging.

Green shoots are beginning to show in the Scottish housing market. Sales are climbing, up 8% compared to March 2012. 25 out of 32 authority areas are seeing more sales, with Midlothian, which had the greatest rise in sales, up 70% compared to a year ago. In Edinburgh, which is obviously a crucial market, the number of flats being sold is up by 60% compared to 2012. The rising number of buyers in the first quarter has helped build market confidence in March. But the supply of properties coming onto the market has been constrained. That’s ramped up competition between buyers, and pushed up house prices.

Although it is not yet clear quite how high the Scottish Government will put supporting the property market up their priority list, the UK Government has taken a number of steps to boost the housing market. The Funding for Lending scheme has been the most important one and has encouraged lenders to lower mortgage rates and reduce interest rates. George Osborne and the UK government are giving the property market a further helping hand with the Help to Buy scheme. That will impact the UK overall, and should help Scotland move forward into broad, sunlit uplands.

“The last year was tough with strict mortgage lending rules which pushed back masses of beleaguered first-time buyers. House prices are still £1,257 lower than a year ago. Sadly poor inflation rates made matters worse and the prospect of public spending cuts in Scotland put the property ladder further out of reach for those struggling to save up for a deposit. But it looks as though we are now turning a corner.”

LSL / Acadametics Scotland House Price Index

House prices rise for the second month in succession

  • Biggest monthly increase of £1,676 seen since June 2007
  • Three-monthly sales up 6% on previous year
House Price Index Monthly Change % Annual Change %
£143,536 194.6 1.2 -1.5

 Richard Sexton, director of e.surv chartered surveyors, part of LSL, comments: “Despite difficult mortgage lending conditions and economic uncertainty, the housing market in Scotland is starting to turn a corner. House prices climbed £1,676 in February, house sales are 6% higher this year and mortgage availability has improved. The lack of supply in properties in Scotland has effectively boosted competition between new and previous buyers, leading to higher prices for well positioned properties”.

“Three consecutive months of rising house prices suggests the market is well set on the road to recovery in 2013. But several big roadblocks still remain. House prices are £2,181 lower than they were last year and mortgage lending criteria are tight, which are alienating a vast range of potential buyers from the property market. The Funding for Lending scheme has improved market confidence as it has allowed lenders to reduce mortgage rates and lower interest rates, but borrower’s personal finances are under withering fire from inflation so they are struggling to put together a deposit. It’s proving to be a real effort for those suffering under the impact of inflation and public spending cuts in Scotland, which are threatening people’s dreams of home ownership.”

“At a local level prices are much more varied, and highlight the endemic weakness that still remain in the market. In February prices increased in 17 out of the 32 local authority areas suggesting on a regional level, the rate of growth in the housing market is flat compared to the wider UK housing market.”

“More attention must be focused on improving the opportunities for first time buyers. To its credit, the Government at least recognized this in the Budget. It will be a real turning point if the latest two schemes under the Help to Buy plans prove to support a significant portion of first time buyers that don’t have the help of the bank of Mum and Dad. The lower tier of the market requires a real boost in mortgage finance and this will help support housing demand in the long term. This year all eyes will be glued to the Scottish Parliament’s response to these schemes and to what extent they may have the power to strengthen the property market”.

The Olympic honeymoon is over: Scottish house prices fall due to Olympic jetlag

House Price Index Monthly Change % Annual Change %
£143,406 194.4 -0.3 -2.9

Richard Sexton, director of e.surv chartered surveyors, part of LSL, comments:

Richard Sexton

“House prices lost some of their altitude in September, but this wasn’t a simple case of the market losing thrust.  The Scottish housing market was still jetlagged following the distraction of the Olympics, with the absence of buyers hitting the streets in August feeding through into a reduced number of sales in September.  As fewer buyers competed for homes, reduced competition sent prices gliding down.  Prices aren’t heading for a crash-landing however – we’ve already seen sales figures rebound in England and Wales, and Scotland’s likely to show a similar improvement in the last quarter of the year as buyers make up for lost ground over the summer.

“One-off factors aside, it’s clear that the housing market is still facing severe structural challenges.  While the affordability of house prices have improved for the average Scottish buyer, the limited availability of mortgage finance is still a significant drag on activity, and the number of new buyers entering the market is still historically low.

“But there are reasons for optimism.  The economy is growing once again, while inflation is slowing, which should help buyers’ spending power take off.  On top of this, the government’s Funding for Lending is showing signs of helping the mortgage market start climbing again.  While lenders’ ability to boost the number of first-time buyers to anything like pre-crunch levels is being hampered by capital adequacy requirements, any improvement in the lower tier will be felt throughout the wider housing market as chains are unlocked.

“Having said that, the national headline figure masks growing regional differences.  While 22 regions have seen prices fall over the last year, 10 have bucked the trend, with Interclyde and the Orkney Islands seeing annual rises of 5.5% and 5.4% respectively.  The future performance of local markets in the long-term will be closely tied to the performance of their immediate economies and labour markets.  A key factor in whether these micro-markets see prices rise or fall in 2013 will be how hard they are hit by new public sector austerity measures in the New Year.  There are also clear signals from the Scottish Government that they wish to ‘travel their own road’ in respect of housing policy and we are about to see an interesting ‘experiment’ as policy North of the border increasingly deviates from that in England & Wales. Time will tell which approach bears the most fruit.”

Table 1.  Average House Prices in Scotland for the period October 2011 – September 2012

           House Price             Index Monthly Change % Annual Change %
October 2011 £147,710 200.3 0.0 -1.3
November 2011 £147,502 200.0 -0.1 -0.7
December 2011 £147,073 199.4 -0.3 -0.9
January 2012 £145,856 197.8 -0.8 -1.9
February 2012 £145,699 197.5 -0.1 -1.7
March 2012 £145,852 197.8 0.1 -1.3
April 2012 £146,272 198.3 0.3 -0.6
May 2012 £146,039 198.0 -0.2 -0.7
June 2012 £146,055 198.0 0.0 -0.1
July 2012 £145,596 197.4 -0.3 -0.5
August 2012 £143,869 195.1 -1.2 -2.1
September 2012 £143,406 194.4 -0.3 -2.9