House prices drop in Scotland

The average selling price in Strathclyde is now £129,000, roughly 13% lower than at the peak of the market in 2007 and £8,500 lower than it was three months ago.

The recent falls in price took annual house price inflation (prices now compared to this time last year) to -5.4%.

The latest GSPC property market report is based on an analysis of sales through 200 GSPC member firms by Professor Gwilym Pryce of the urban studies department at Glasgow University and includes more transactions in the west of Scotland than any other index (with the exception of the Registers of Scotland).

Despite sometimes wild fluctuations, average selling prices are now almost exactly where they were at the start of 2010.

According to Professor Gwilym Pryce of Glasgow University: “Over the last two years we have seen a see-saw effect with falls in house prices followed by price rises or price stability.

“Sellers are understandably reluctant to lower prices and so hold out for what they regard as an acceptable offer. At some point, they recognise that the market price has genuinely fallen, adjust their expectations and lower the threshold price at which they are willing to sell.

“This is the underlying dynamic behind the apparent volatility in prices.”

The same effect can be seen in selling times which have fallen significantly over the last three months, from 151 days in June to 126 days today. Normally, this would be associated with an increase in demand and, therefore, prices. But in current market conditions, a quicker sale is indicative of sellers adjusting their perceptions of market conditions and the current value of their home.

Transaction numbers remain exceptionally low. While overall sales are broadly level with the same time last year, there is significant caution among buyers combined with limited mortgage availability.

The number of new instructions is only slightly above the levels last seen in 2009 when the market was at its weakest.

Commenting on the report, GSPC chief executive, Mark Hordern, said: “One word describes the property market today; ‘cautious’. Buyers are wary of committing themselves in uncertain times and sellers are reluctant to sell for less than they believe their home is worth.

“Fears of a double dip recession, recent job losses and a continuing shortage of mortgage finance have all combined to create an atmosphere of caution and property is not the only market to be affected.

“Nevertheless, there is substantial pent-up demand to move and greater confidence in terms of the economy and individual job prospects could well see a flurry of activity as and when conditions improve.

“In the meantime, the fall in the number of new instructions will ultimately restrict supply and so help to support prices. That is exactly what happened in the first half of 2010 and it could well happen again in 2012.”