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House prices rise sharply in last three months

• Prices rise substantially in last quarter
• Selling times shorten
• Sharp rise in new instructions
• Recovery positive but fragile

House prices in the west of Scotland rose sharply in the last three months, reversing recent falls, according to the latest GSPC House Price Survey.  The analysis for the survey is conducted independently 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).

The average selling price of a home in Scotland's most populous region rose by around £8,500, or 6.7 per cent to £138,000 in the last three months, following two previous quarters of price falls (see graph below). 

Average selling prices are now 1.5 per cent higher than the £136,000 recorded a year ago and are at roughly the same level as late summer 2008, just as the ‘credit crunch' was starting to make its presence felt.  Nevertheless, they remain around eight per cent below their peak at the end of 2007. 

Selling times, a key measure of market conditions, have fallen sharply. In March this year, sellers could expect their home to sell in around 127 days on average - over four months.  Today, the average time to sell a home is 72 days - around two and a half months.  According to Professor Pryce: "Time on the market today is more than 40 per cent lower than in the first three months of the year and 35 per cent lower than a year ago.  Indeed, selling times are now, in many areas, the lowest they have been since the third quarter of 2008".

There has also been a sharp rise in the number of homes coming on to the market.   Although there is always a seasonal rise in new instructions at this time of year, a comparison with the same time last year shows that the number of new instructions is now almost 50 per cent up on the same time in 2009.
 
Nevertheless, GSPC maintains that the recovery in the property market remains fragile and that the rebound in prices over the last few months is unlikely to be the start of a sustained rise in prices.

According to Professor Pryce: "These positive results may signify the beginning of a more sustained recovery but it is likely that progress will remain sensitive to consumer confidence and the prospects for growth in the wider economy".

GSPC Chairman, Michael Samuel, commented: "The recovery in prices, the fall in selling times and the rise in new instructions are all signs of growing market confidence.  

"Nevertheless, it is important to make a distinction between a healthy market and higher prices.  A healthy market is one where people can move home with relative ease.  That does not necessarily require or involve rising prices.  While we expect the market to remain healthy, we think it is very unlikely that prices will continue to rise at this pace.

"Although mortgage supply has improved somewhat, the number of loans for house purchase is still very low and is likely to remain that way for some time.  Moreover, cuts to public spending foreshadowed in the emergency budget will dent to the confidence of many working in the public sector who may well postpone important decisions such as moving home until their immediate future is clearer. 

"And the growth in homes coming on to the market is likely to cap price growth in the immediate future.  The recovery in confidence and an increase in supply will offer buyers more choice and so help to limit further increases in price this year".