Assetz® News - Beaming up Scotland

Beaming up Scotland

8th April 2009 |

When it came to the house price boom, there was an interesting lack of geographical polarisation in Britain. Far from the boom being only concentrated in the south around London and the Home Counties, the opposite end of the island was also seeing high house price inflation, with the north and midlands of England being sluggish by comparison with both the national capital and locations north of Hadrian's Wall.

Indeed, it was the north of Scotland that saw much of the boom, with the Highlands doing well as the city of Inverness saw a rapid population rise and Aberdeen boomed as oil prices rose, leaving the other main Scottish cities trailing in its wake.

Of course, the downturn on the housing market and subsequently in the wider economy has meant that both in Scotland - and in the UK as a whole - prices have long since ceased to boom and have been heading downwards.

A UK-wide recovery may be difficult to discern as yet, with Nationwide's chief economist Fionnuala Earley urging caution in response to the lender's March figures showing a 0.9 per cent price rise.

But in Scotland, the situation is now definitely one where signs of recovery can be discerned, according to Dianne Paterson, property partner at legal firm Russel + Aitken.

She stated: "There is no doubt that the Scottish property market is now showing gradual signs of recovery. Property prices have risen and the volume of sales have increased over the last few months in many areas."

Ms Paterson added that a number of reasons are contributing to the trend, remarking: "Confidence - which is one of the principal driving factors in the market place - is coming back slowly, the media is not so doom laden and funding is beginning to come through again. Suppressed activity on the part of buyers and sellers is being triggered by lower interest rates, availability of finance and concern that prices will start to increase once more." This extra finance, she noted, includes the reappearance of 85 per cent loan-to-value mortgages.

These comments are at least partially backed up by Nationwide's figures for house prices during the first quarter of 2009. These indicate that Scotland's price decline over the previous year - 12.6 per cent - was less than the overall UK figure of 16.5 per cent to start with, while the optimism for the future is greater. While 33 per cent of Scots expected prices to carry on falling in the next six months, this figure represents the lowest proportion of such negative sentiment of any region.

Against that, Scotland did show the largest negative swing in prices in the quarter, with a 5.1 per cent decline, but this came after a 0.1 per cent rise in the last three months of 2008. Put the two figures together and the longer-term picture looks less negative.

So while the UK as a whole may not be sure that the market is starting to bounce back, it could just be that in Scotland there is a little more positive expectation, which may in turn help encourage the sort of sentiment that will prompt people to buy.