Every day brings a new story in the press about the prospects for the housing market, and just about the only conclusion that can be drawn is that nobody really knows what is going to happen to the property market over the next 12 months.
In April, for example, Lloyds TSB Scotland were reporting that Scottish house prices had fallen by 3.3% on an annual basis, but in their next report, in July, there was an increase of 0.8%. ESPC statistics at the end of the second quarter of 2010 showed that the average house price in Edinburgh had risen by 9.6% in the last year and that the number of homes sold in Edinburgh had risen by over 30%, but one year earlier, they were reporting that the average house price had fallen by 11% and that the number of properties sold in the second quarter of 2009 was 50% down compared to the same three month period in 2008. Nationwide Building Society’s figures indicate that Scotland was the worst performing region in the third quarter of this year, with prices falling 3.4%, but 12 months earlier, Scotland was the best performing region on an annual basis. Finally, Registers of Scotland, whose latest figures cover the period to 30 June indicate an annual increase of 5.3%, but in June 2009, they showed a 6.5% drop on the equivalent figure in 2008.
It is extremely difficult to make any sense of this, but the picture that has emerged is that house prices are, more or less, at the levels at which they stood towards the end of 2007. There was house price growth in 2008, but this was all wiped out by the effects of the recession last year and prices in 2010 have remained, in most areas and for most types of property, fairly flat.
What this holds for the future is really anybody’s guess, but, in many respects, the more disturbing element of the housing market is the significant downturn in volumes of sales and purchases. Most analysts agree that transaction numbers are only about 50% of the levels they reached in 2007/08 and that the next 12 months will not produce a significant improvement. Transaction costs, such as Stamp Duty for purchasers and Home Reports for sellers are both inhibiting factors and the fact that the banks continue to make borrowing so difficult, puts house purchase beyond the reach of many.
The other lesson to be gleaned from all the statistics is that we should perhaps completely ignore 2009, because any comparisons with it are so dangerous. It was the worst year for the property market since modern price indices began and it will be a great relief when 2011 arrives and 2009 drops out of the year-on year comparisons!