Scottish house price growth continues

Posted on 15/07/2014

Average house prices in Scotland rose on a seasonally adjusted basis by £884 in May, or 0.5%, according to the latest house price index for Scotland from LSL Property Services and Acadata.

This is the ninth successive month that house prices have risen in Scotland, and is the longest run of positive monthly gains since April 2007 – Dec 2007, the time when prices were climbing towards the last housing peak, in May 2008.

On an annual basis, house prices have increased by £6,750 or 4.3%. This percentage increase is 2.9% above May’s annual consumer price inflation rate, using the CPIH index of 1.4%, which includes housing costs.

Richard Sexton, director of e.surv chartered surveyors, part of LSL Property Services, said: “The view of the housing market recovery in Scotland is dependent on whether it is seen through the average price or current volumes. We are now seeing the longest sustained period of price growth in seven years. Prices have not climbed so steadily every month since December 2007. Not only this, but growth has put down roots across the country, with 87% of the local authority areas in Scotland enjoying annual average house price rises. Overall, house prices in Scotland have risen 4.3% (equal to £6,750) in the past year. In May a new record house price was reached in Aberdeenshire, taking the cost of an average home to £224,803.

“First-time buyers provide a solid foundation for the recovery to continue building on. In the three months to May 2014, the number of flats sold rose 26% on the same period last year, followed by terraced houses with a 22% annual increase in sales. As the typical property choices for first-time buyers, this illustrates the stream of activity at the entry level of the market powering growth and consumer confidence.

“The only fly in the ointment is a decline in total house sales, dropping 3% from April to May 2014. This goes against the historic seasonal trend for this time of year, suggesting that tighter regulations under the Mortgage Market Review have temporarily slowed housing transactions. But with recurrent indications that interest rates will rise before the year is out, new record property prices being set, and only three months to go before the Independence referendum, potential buyers may also be taking heed of caution and delaying purchase decisions until they can be clear what the future holds.

“Whether this monthly blip is symptomatic of a broader turning tide in the housing market remains to be seen, as it is still too early to see the woods for the trees. More changes are afoot, with greater stress testing and loan-to-income caps coming into play to ensure the long-term health of the property market. While it may be tempting for the UK government and Bank of England to intervene and rein in housing demand, it is not necessary in many parts of the UK, and could pull the rug out from under the feet of recovery in areas where growth is still bedding down. In the city of Glasgow house prices dropped 3.1% in the month to May 2014. The Help to Buy scheme and further investment into new housing developments are a lifeline in areas such as these to consolidate growth.”