Richard Sexton, director of e.surv chartered surveyors, part of LSL, comments:
“Prices spiraled downward in January. House prices usually fall over the winter months as would-be buyers nurse their finances back to health after Christmas. But this is bad news even compared to this time last year - the average house is now worth almost £3,000 less than in January 2011.
“That’s not to say people aren’t still keen to move home. The root of the problem is how hard it is to get a mortgage. Banks just aren’t lending, and that is acting as a foot on the windpipe of the housing market. Indeed, loans for home movers crumbled by 10% in the last quarter, with first time buyers hit particularly hard by the mortgage drought. The 8% drop in flat prices, typically bought by first time buyers, is a tell-tale sign of a struggling market.
"The dwindling number of new buyers at the bottom of the market has choked off activity in the higher echelons of the property ladder. This is forcing sellers to slash their asking prices and is stymieing any chance of prices rehabilitating to their previous highs.
“A drop-off in the economy will exacerbate these underlying weaknesses. With the public sector accounting for 55% of Scotland’s GDP, the housing market is likely to be wounded more by the bite of public sector austerity than its English counterpart. In the longer-term, any concerted rise in transactions will be inexorably tied to the outcome of the European financial crisis, because it will affect banks’ and building societies’ ability to inject more funds into mortgage lending.
"There also must be concern that the ‘will they/won’t they’ Independence issue will cause inwards investors to pause, whilst uncertainty exists, with a possible knock on effect for the economy and housing market as a result.”
