The average price of a property in Edinburgh still remains in positive territory compared to a year ago, but the credit crunch is beginning to bite at the lower end of the market. According to second quarter statistics released by the Edinburgh Solicitors' Property Centre (ESPC) today, the average price of a property in Edinburgh is up 2.6%, from £227,912 to £233,840, on a year ago.
As banks rein in their lending practices after years of easy money, first time buyers are finding it increasingly difficult to raise funding to get a foot on the property ladder. As the new blood drains from the market, properties at the lower end of the market are experiencing the biggest drop-off in demand.
The average price of a one-bedroom flat rose by just over 1%
annually in the three months to June. In contrast, the average price of
a three or four-bedroom house increased by 4% during the same period.
While the Edinburgh property market has not slowed as dramatically as in other parts of the UK - the Halifax today reported that overall UK house prices are down 6.1% year on year and down 10% since prices peaked in August last year - growth has been more sluggish than the ESPC predicted for 2008.
In January, the ESPC expected the average Edinburgh property price to rise 3% to 5% in 2008, putting the latest figures below the lower end of its predictions and well off the average price rise of 9.3% in 2007.
Other statistics from today's ESPC release paint a picture of a changing market. The total value of the city of Edinburgh's property sales are down 34.7% from £744.6m to £486.4m since April-June period last year and the volume of sales is down 36.3% from 3,267 to 2,080.
"It's a Buyers market"
Commenting on the results Ron Smith, chief executive of ESPC said: "These figures illustrate that buyers are in a much stronger negotiating position than they have been for some time, and both sellers and buyers will have to adapt to this new reality. From the sellers‟ perspective, it is likely that they will have to moderate their expectations on the price their property will attract. The flip side of this is that they should be able to secure their next property for a lower price than they may have anticipated. Although most looking to move would be best advised to sell before they buy in the current market conditions, it is wise to start viewing potential purchases early to get a better idea of how much you will have to bid and be in a position to move quickly when you sell your current home."
"For first-time buyers who are able to secure a mortgage, this change in market conditions offers them the opportunity to make slightly lower bids on a home secure in the knowledge that if they are unsuccessful there is likely to be a number of other suitable alternatives available on the market."
Same story Regionally
It's a similar story across the East Central Region where due to
falling sales volume, the number of properties for sale has risen by
over 50%. In the second quarter of 2007 there were around
4,000 properties on the market compared with over 6,100 today.
The average price of a property across the region continued to show
modest growth of 3.1%, but the number of completed sales fell by some
40% reflecting the extent to which the market has cooled over the last
three months.
In East Lothian the average price of a property is £213,977
following a year-on-year increase of 4.9%, but this was accompanied by
a 27% decrease in the number of sales completed. Similarly, in West
Lothian the average price of property increased by 1.7% over the last
year, but the number of sales was some 28% down on 2007 levels.
The
increase in the selection of properties has also allowed buyers to
offer lower bids to secure their home, with the average premiums
achieved on properties marketed at Offers Over falling by 5% in most
regions.
In Edinburgh, the average premium paid on
an property sold at Offers Over during the second quarter of 2008 stood
at 23.1%, down from 28.3% during the same period in 2007.
Lesley Canavan, general manager of ESPC Money Management added a note of caution to property buyers and owners. "The price rises in recent years have been driven partially through the availability of cheap credit. This is no longer the case and affordability of debt is becoming much more important in the buying process," he said.
The decision by the Bank of England's Monetary Policiy Committee, today, to keep interest rates on hold suggests that inflation is still a big concern at the bank and that in spite of the credit crunch, the next move in interest rates may be up.
Canavan adds: "Working out what is affordable is a far better approach than looking to maximize what can be offered. Even for those not looking to move home, rising inflation has increased the likelihood of a rise in interest rates before the end of the year, so I would advise buyers to stress test their mortgage to see how their repayments would be impacted by any change if they are looking at a variable rate mortgage."