The average house price in Edinburgh now stands at £193,354 after falling 10.1% in the last year, said the Edinburgh Solicitors Property Centre today. While this is a bigger fall than the house price drop across East Central Scotland, where the average price fell 8.5% to £181,527, Edinburgh has managed to avoid some of the pain experienced south of the border.
The Nationwide, the UK's biggest building society, announced yesterday that house prices across the UK fell 15.9% to £153,048 in 2008, making it the worst year on record. Last Friday, the Halifax announced UK house prices have fallen 16.2% to £159,896 in 2008.
Credit continues to crunch
The Bank of England's swathing cuts in interest rates to 2% at the end of 2008 may be beginning to filter through. In its quaterly statement, the ESPC offers Edinburgh home-owners a glimmer of hope with the suggestion that prices appear to be stabilising after dropping just
4% annually in
December.
However, overall, the latest statistics point to a massive contraction in the property market over the last year. Sales were down by 67%, with 825 properties sold in Edinburgh during the last three
months of 2008 compared with just over two and a half thousand during
the same period in 2007.
The total value of properties sold in Edinburgh in the last quarter fell 70.5% from £540.1m in October to December 2007 to £159.5m in the same period in 2008.
Sellers are also finding that premiums on properties sold at "offers over" are being squeezed further as the market has flipped from a seller's to a buyer's market.
"There is no question that 2008 was a turbulent year," said Ron Smith, ESPC chief executive. "The situation in financial markets resulted in severe restrictions being placed on lending criteria meaning the housing market was impacted more swiftly and significantly than anticipated."
Price premiums down
Evidence pointed towards successful sellers being those who were willing to negotiate with buyers on the price of their property. The average premium which buyers had to pay to secure a property in the Capital during the last quarter was just 11.5% - down from 26.1% in the previous year. Similarly, three-quarters of sellers of properties at fixed price accepted an offer below the asking price compared with less than one in two during the last quarter of 2007.
Beyond Edinburgh, most regions saw a fall of around 10%. East Lothian fell a smaller 1.8% however the region had witnessed comparatively modest growth towards the end of 2007 meaning that the rate of change over the last two years was broadly in line with other areas.
Robin Stimpson, ESPC chairman, concluded: "Broadly speaking, the shifts we have observed in the market have taken prices back to the sort of levels being recorded at the start of 2007. Areas recording more modest growth since then observed more modest falls, whilst those which achieved superior growth have generally seen slightly larger offsetting falls."
He added: "Understandably, those who will be most negatively affected by short-term falls will be those who purchased at the peak of the market or those who have less equity in their property. Conversely many potential first-time buyers stand to gain significantly from the increasing affordability of property. The coming year promises to be an interesting one for the market as negotiations on price become more commonplace and buyers are able to take advantage of improved choice and affordability. Over the longer term the fundamentals of the local market remain solid with the number of households projected to continue rising. A return to rapid inflation witnessed in recent years would be neither sustainable nor desirable, but as lending criteria become more relaxed in the future we should see prices start to rise again at more modest levels which ultimately will benefit everyone involved in the market."
Micro markets
Within Edinburgh, some properties in some areas appear to have fallen harder than others. For example, 2 bedroom flats in Stockbridge saw a fall of just 0.8% from £247,839 to £245,909 since last year, while city centre properties as a whole fell 13.6% from £256,480 to £221,472. 1 bedroom flats in Leith Walk/Easter Road are down 8.5% in 2008 from £125,187 to £114,567, while Gorgie/Dalry single bedroom flats are down 12.3% from £123,546 to £108,338.
Edinburgh House Price Predictions
Following the line taken by the Nationwide and Halifax, the ESPC has decided not to make any predictions about future house prices.
"In light of the current rate of change in the economic landscape it
would be unwise to offer projections for house prices over the longer
term. It would be reasonable to assume we will not see a return to
house price inflation during 2009 although we may see a levelling off
in the market during the second half of the year," said Ron Smith.