House prices continue to rise in capital despite Northern Rock crisis
3 October 2007
Latest figures released today by ESPC show house prices rose by over 10% in Edinburgh despite a turbulent period in the finance sector which ultimately saw the Bank of England called into action as lender of last resort for Northern Rock.
An annual rise of 11.2% in the three months to October took the average price of a property in the City to £221,986, up from £199,615 in the same period the previous year.
The results mean house price inflation in the Capital has now topped 10% in six consecutive quarters dating back to early 2006.
Commenting on the results, David Marshall, ESPC business analyst said: "The Northern Rock situation created a degree of uncertainty among buyers, however this has not resulted in a cooling in the market. Examining the monthly figures, annual inflation actually picked up slightly last month, from 10.6% in August to 13.4% in September."
"Looking ahead we are likely to see an increase in the cost of borrowing for those with poorer credit histories", continued David Marshall. "Balanced against this however is the fact recent events have decreased the likelihood of a further rise in interest rates before the end of the year. Given the current buoyancy of house prices in east central Scotland, the long term impact of the Northern Rock situation on the local market is likely to be fairly minimal."
Demand continues to be highest for smaller typical first-time buyer properties in the Capital. In Gorgie and Dalry for example, a rise of 20.4% took the average price of one-bedroom flat to £126,330, while in the fashionable Stockbridge and Comely Bank districts an average two-bedroom flat sold for £267,469 following an increase of 26.5% over the year.
Ron Smith, ESPC chief executive comments: "As we have been saying for some time, the level of inflation we have seen over the last 18 months is not sustainable over the longer term. The average one-bedroom flat now sells for over £144,000 in Edinburgh, having barely topped £100,000 just three years ago. It is this reduction in affordability, coupled with interest rate rises over the last two years, that should reign in inflation in coming months. Given the robustness of the market at present this should see a gentle cooling to around the 5% mark come the turn of the year."
Further afield, East Lothian continued to witness some of the fastest growth outwith the Capital. The average price of a property in the region topped £200,000 for the first time earlier this year, and an annual rise of almost 20% during the third quarter means the average home in the region now sells for £219,323.
The largest rises though were focused on the market in West Fife & Kinross, where an overall increase of 24.2% was recorded. As buyers continued to look outside the Capital for affordable housing, the average price of a property in Dunfermline was pushed up by 21% to the new level of £153,071."
Robin Stimpson, ESPC chairman, concluded: "The local property market has demonstrated remarkable robustness so far this year. While we have seen a steady increase in the supply of properties to the market, the level of demand is such that inflation continues to exceed our projections. This should ease somewhat toward the end of the year, bringing inflation down toward more sustainable levels over the coming months."
Issued by ESPC(UK)Ltd
For further information, please contact:
David Marshalltel 0131 624 8515