2009 ENDS WITH HOUSE PRICES UNCHANGED ON A YEAR AGO.  MORE MOVERS, BUT NO RETURN TO PRICE GROWTH IN 2010

• House prices unchanged over 2009 after ‘rollercoaster' ride
• Selling times fall sharply as confidence improves
• Transaction numbers low as sellers stay put
• Forecast for 2010 - more movers, fewer price moves

Rollercoaster year

House prices across west central Scotland, the country's largest property market, are almost exactly the same as they were a year ago according to the latest GSPC House Price Survey.  Despite the financial crisis, a mortgage ‘drought' and the recession, the average house price in Strathclyde currently stands at £134,400, just as it did at the end of 2008. 

The minor change in the headline figure, however, disguises a rollercoaster ride in the property market this year characterised by a precipitous fall in sales and a sharp reversal in   prices followed by a steeper than expected recovery.

Selling prices are now around 10 per cent below their peak two years ago - a much more modest fall than many expected.  Prices in most areas hit their low point in the first three months of this year and have recovered some ground since then.  But location is, as always, key.  In Glasgow prices are now 1.4 per cent lower than a year ago, but are just eight per cent below their peak in mid 2007.  Prices in other areas are now 4.4 per cent higher than they were a year ago, but the fall from the peak has been steeper - about 16 per cent.

Although sales fell sharply in the first quarter of the year, this was more than matched by the fall in the number of properties coming on to the market.  Over the last 12 months, the number of new homes being put up for sale has almost halved, limiting choice and driving competition between buyers in some areas.  The willingness of sellers to stay put speaks volumes about their reluctance to sell their homes cheaply and their ability to hold on has been helped by ultra low interest rates that are gradually being passed on by lenders. 

There are signs, however, that the market has improved by more than the headline figures might suggest.  Selling times have fallen quite dramatically over the last 12 months to around 80 days from a peak of 132 days at the start of the year.  Widely seen as a key measure of market conditions, the reduction in selling times implies a significant recovery in confidence that is not reflected in the selling prices data. 

The analysis is conducted by Professor Gwilym Pryce of the Urban Studies Department at Glasgow University.  It includes more transactions in the west of Scotland than any other index (with the exception of the Registers of Scotland) and is regarded as the most authoritative source of information on Scotland's largest property market.

Forecast for 2010
Looking to 2010, GSPC forecasts that prices will hover around their current levels throughout the year, but expects to see a continued improvement in the number of transactions. 

Pointing to the sharp decline in selling times, Professor Gwilym Pryce of the Urban Studies Department at Glasgow University, who conducted the analysis of the GSPC data, says that: "The most likely explanation is that sellers are becoming more realistic about the price they can expect to achieve and are adjusting their expectations".  Selling prices today, he points out, are almost exactly the same as asking prices.  This trend would also be consistent with the introduction of Home Reports a year ago which, for the first time, provided all buyers with a valuation by a surveyor much earlier in the process.

GSPC Chairman, Michael Samuel, says that, at the very least, the dire conditions experienced in the early spring are unlikely to be repeated next year: "Spring is traditionally the time when the property market gets in to its stride.  This year, that was halted in its tracks by something which got very close to financial meltdown.  Very few properties came on to the market and very few sold.  But it is becoming clear that the property market is gradually clawing its way out of the downturn and spring next year should be markedly better that it was in 2009. 

"More homes are likely to come on to the market as sellers recognise that it is possible to sell their home at a reasonable price.  The earlier perception that it is simply not possible to move will gradually evaporate.  At the same time, somewhat better mortgage supply and more competitive mortgage rates, especially for those will relatively low deposits, will help to sustain demand.   The result should be better market liquidity for all.  The recent sharp fall in selling times suggests strongly that buyers and sellers are increasingly agreeing on what is an acceptable market price after months in which sellers expectations were way above buyers' hopes.  That trend is likely to continue.

"Prices, however, are unlikely to rise significantly, although there may be minor fluctuations around the current averages.  Any recovery in the economy will not have an impact on the property market for some time to come - at least until real incomes start to rise again and insecurity about jobs fades.  At the same time, more houses coming on to the market will widen choice and so help to spread demand.   The impact of low interest rates and better mortgage availability is likely to be offset by continued economic weakness and concerns about jobs.

"To use an analogy that we are all familiar with, the year started with a massive motorway pile up and the property market suffered from a huge tail back.  Since then, traffic has started to edge forwards and has picked up speed in the last few months. But it will take a long time for conditions to get back to normal and until it does, we will all be in a somewhat lower gear that we would wish".