A little gloom but it's not all doom

From The Herald

August 28, 2008

A little gloom ... but it’s not all doom

The for sale' signs tell their own story: they go up more than they come down. Scottish streets are now lined with them, tens of thousands of little plastic boards saying something is wrong with the housing market. Yesterday, official figures showed exactly what the problem is. Houses are harder to sell, and harder to buy.

A total of 31,026 homes changed hands in the second quarter of this year, 7459 fewer than in the same period a year ago, according to Registers of Scotland, the public body that records every single property transaction north of the border. That is a decline of nearly 20% in the size of the housing market in just a year. Estate agents have even coined a new word to sum up what is happening. They call it "Brickormortis".

Put crudely, many would-be buyers, perhaps one in five of them, can't get mortgages. Result: the number of houses sold drops by one-fifth.

Surely Brickormortis should also bring prices down? Well, not here, at least not yet. Registers of Scotland yesterday reported prices up in the second quarter, by 4.6% from the same three months of 2007 and by 3.6% from January to March 2008.

That has got a lot economists scratching their heads. Colin Bell is one of them. "Some sellers must be hanging on like grim death," said the professor of economics at Stirling University. "They must be determined to wait until they eventually find somebody who has the money they want."

The normal rules of economics don't seem to apply to the Scottish housing market, at least at first glance. Demand is down as buyers can't get mortgages. Supply is up so there is a glut of homes for sale. Yet prices are up, too: the average home in Scotland last quarter sold for £155,691, up from £148,873 on the previous year. Elsewhere in the UK prices are falling. They are down in leafy suburbs of the south-east and the Coronation Streets of the north. They are down in Wales and they are down, by more than anywhere else, in Northern Ireland. Why is Scotland different?

Professor Bell points to Scotland's respective economic good health. "I can't believe we are immune," he said. "The financial issues associated with the credit crunch are relevant to Scotland as to the rest of the UK. True, the labour market here is stronger and we don't have very many distressed sales when people lose their jobs."

House prices, he added, remain more affordable, on average lower than the rest of the UK. Scotland didn't quite keep up with the housing boom of England, Wales and Northern Ireland in the good years. It may not keep up - or down - with them in the bad years either.

Some housing watchers are now wondering aloud if Scotland's age-old system of conveyancing, which avoids the chains and gazumping seen in England, could help iron some of the extremes out of the market.

So what next? Will prices go up or down next quarter? "There will be a correction, not a crash," said John Boyle, a consultant at DTZ. "I'm forecasting a small fall in house prices in Scotland by summer 2009, but probably by less than 5%, not the 20 to 25% that some consultancies are forecasting, almost hysterically trying to outdo each other as to how bad it will get. Prices should pick-up from the end of 2009, although at nothing like the rate of growth between 2001 and 2007, which is no bad thing."

There are, after all, economic fundamentals in Scotland that should prop up the housing market. The population is booming, bucking doom and gloom predictions. More importantly, it is atomising. Family break-up and later marriages have left far more Scots living alone than ever before. That means higher demand for houses. The economy is still growing, by a modest 0.2% in the first quarter, the last for which figures are available. And, despite all those "for sale" signs, there are supply side problems too. The number of new homes built in Scotland has fallen slightly in every one of the last three years. This year it will, by most estimates, halve.

Scottish forecasters are now whispering that the nation may be better placed than much of the rest of the UK - and even Europe - to ride out the current economic slowdown. Scotland, after all, suffered less during the last recession than England. It also, it has to be said, benefited less from the following boom.

"It's a bit of the hare and the tortoise," said one commentator. "We may now catch up some of the Arc of Prosperity countries that Alex Salmond keeps referring us to; Ireland and Denmark are both officially in recession."

The credit crunch is still making it harder for lower-income and first -time buyers to get on to the property ladder. Last month the Council of Mortgage Lenders revealed its members had issued 34,200 home loans in the first half of the year, down from 48,200 between January and June 2007.

One of the most important lessons from the Registers of Scotland figures released yesterday is the huge regional variation within the Scottish market. The value of different housing markets round the country fell by nearly 39% in North Ayrshire, 28% in Fife, 24.5% in Glasgow, 21% in Edinburgh and 28% in Dundee. But a significant exception was the north-east: the figure rose by 9.3% in Aberdeenshire and 10.7% in Angus.

Average prices also vary widely - up 5.9% in Edinburgh, but down 1.5% in Glasgow. Some houses, obviously, are still selling. Experts think they know where: in the same places they always do. Essentially average prices, market watchers reckon, are up because big houses in nice areas are holding - and increasing - their value and their combined rises are outweighing falling prices for small flats in less- fashionable neighbourhoods.

"The regional analysis shows the right product in the right place is still fetching the right price, especially at the middle to top ends of the market," Mr Boyle said.

"Buying a house should still be seen as a very good long-term investment. If people realise this and are not put off by the hysterical headlines, then sales will pick up and we'll soon be out of this."

'If there is no interest we'll put it up for rent'
GLASGOW WEST END

In Bellhaven Terrace West the buffed sandstone, polished buzzers, and lines of prestige cars speak money. In this exclusive enclave of the city there are always apartments for sale. But the question is how long are they taking to sell?

Sales executive Mya Aronica, 32, is feeling hopeful. The penthouse apartment, just off Great Western Road, which she shares with her partner has been on the market for a month, but not one potential buyer has expressed an interest - until last night. Neither expected the slow interest there has been in their luxury home.

They are not alone. The number of houses selling in Glasgow fell by 23.4%, mirroring the total value of the market, which fell by 24.5%. Even average prices fell slightly by 1.5%. At offers over £285,000, the couple hope their property will sell for far more than the Glasgow average of £139,000.

Ms Aronica said: "Yes, we have been surprised, because within two weeks of when we put it on the market somebody called to say they we were interested, but they didn't show up."

They were a little hesitant about putting the penthouse on the market when the property market was depressed, but had no choice.

Ms Aronica said: "We are moving to Aberdeen because my partner got a new job, that is why we had to enter the market at this time. We will have to rent a hotel room in Aberdeen for the time being and we will keep this place on for another month or two, and if there is no interest, or if we are going to lose a lot of money, I think we will put it up for rent.

"Then in a couple of years, hopefully things will look a little better and we will try to sell it once again."

WITH crystal views of the Isle of Arran and the Paps of Jura on a clear day, it might seem surprising that so many people want to leave Mariners View in Ardrossan.

But in this development of flats, built just three years ago, there are 10 properties with estate agents' boards in the window. North Ayrshire has experienced the biggest contraction in its housing market of any local authority in Scotland, with total sales values dropping almost 39% in just a year.

Only 703 properties sold between April and June compared to 1188 in the same period the year before, a drop of 40.8%.

Tom Campbell, 78, a retired teacher, and his wife Irene, 75, bought their two-bedroom flat when it first went up for sale.

Mr Campbell said it was the open views which attracted them to the property.

They want to leave because they downsized from their four-bedroom house in Saltcoats one step too far and are finding their current accommodation a little cramped. Mr Campbell described himself as a "bookaholic" who struggles to find room for all his reading material. His bagpipes and love of antiques also clog up his modern flat a little more than is comfortable.

Their flat has been on the market for 15 months. Not long after it was advertised, a neighbouring property went up for sale, then another, and another.

Mrs Campbell said: "When we first saw the other signs we thought that's not so good', but what can you do? The answer is absolutely nothing."

Since they put their home on the market they have had a handful of people round to look at their home and one serious offer.

"Within the first month a lady came down from Glasgow.

"She loved it and put an offer in, but then she had to pull out because her buyer pulled out of buying her house because someone had pulled out of buying theirs.

"We have been looking at other places we would like to move to, but we can't do anything about it yet.

"We just have to be patient."