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Scots house prices keep on growing but credit crunch is having an effect

by Julia Horton© The Herald
Originally published: 08.07.2008

House prices in Scotland are continuing to grow but there is increasing evidence that the credit crunch is now hitting harder, new official figures yesterday suggested.

Annual house-price growth in the year to May remained highest in Scotland at 6.9per cent, nearly double the 3.8per cent rise in England, according to the latest UK house-price index statistics.

The results put the average house price in Scotland in May at £230,000, up from £215,200 in May 2007.

However, the figures do not give any indication of the numbers of houses being sold, which one Scottish estate agency told The Herald yesterday were down by a third on usual levels.

The revelation reflected a grimmer picture of lending revealed in a second report yesterday showing that loans for first-time buyers and remortgages were both down by around 40per cent on last year.

The Council of Mortgage Lenders said the number of loans to first-time buyers stood at 19,200 this May - 41per cent lower than May last year. Meanwhile there were 33,500 loans for people who were remortgaging, down 46per cent on the previous year.

A survey of estate agents by leading bank Abbey also out yesterday showed that nearly two-thirds believed the property market would start recovering within a year.

The view from estate agents in Scotland was mixed with one reporting significantly fewer sales than would normally be expected.

Rettie and Co. , which has offices in Edinburgh, Glasgow and the Borders, said it was clear that while some properties still drew "eyewatering" offers, the market north of the border was slowing.

Tony Perrian, Rettie director of residential sales, told The Herald: "It's air to say we have noticed the volume of transactions has dropped a from levels we would expect at this time of year. The general economic uncertainty has not been very positive."

At Clyde Properties in Glasgow's West End, valuer Oliver Paul gave a more positive assessment He said: "There are definitely fewer first-time buyers, however a property that has been presented well and is in a decent location will still get a good price."