ELPG issues 2009 property predictions

by Scott Douglas

Friday, January 2nd, 2009

Read the full article in the Evening News here

House prices across Scotland are likely to level out in 2009 as falling interest rates and better mortgage deals create the ideal conditions for first-time buyers, according to a group of the country’s leading property solicitors.

The ELPG group, which is made up of Warners, Neilsons, Leslie Deans & Co, Drummond Miller and the Lints Partnership, believes that house prices will reach their lowest figure in the early months of 2009 before they level out – prompting buyers to quickly enter the market before prices start to recover.

The group, which accounts for around 25% of property sales in the ESPC, says that consecutive cuts in the base interest rate and the continuing freeze on Stamp Duty on properties up to £175,000 has created favourable conditions for first-time buyers to make their first step on the ladder.

And they predict that banks and lenders will start offering better mortgage deals within the coming year, which will encourage more buyers into the market.

Les Deans, senior partner with ELPG firm Leslie Deans & Co, said: “I think we are starting to see house prices level out now, which is a positive sign for the property market. I don’t believe prices in Scotland – and Edinburgh in particular – will continue to fall dramatically and this will encourage buyers to make a purchase.

“At the moment, there are still many people who are waiting for the market to fall even lower before they buy a property. They’re seeing interest rates and house prices continuing to fall and they think that they will get a better deal if they hold on.

“But the truth is that they won’t get a better chance than this to get a bargain. We’re already seeing property investors enter the Edinburgh market, which is a sign that we’re nearing the bottom in terms of prices, so I do not believe buyers will benefit from waiting.

“After a few months at the bottom of the curve, we’ll start to see more properties being sold and – ultimately – prices starting to recover as people begin to realise that they won’t get a better deal by waiting to buy.”

The ELPG also disagrees with the view of some commentators who have predicted that London and the South of England will be the first areas in the UK to witness a property revival.

They argue that because Scotland’s system of missives means each transaction on the property chain is insulated from the next – unlike the English “subject to contract” procedure, which can lead to a series of deals all falling down at the same time – the first seeds of the UK’s property revival are likely to be experienced north of the Border.

Steve Spence, senior partner of Neilsons, said: “There is a huge distinction to be drawn between the Scottish and English markets.  The English market does not look like improving in the short term, house prices have been falling at a much higher rate than in Scotland and the subject to contract procedure which creates long chains of interdependent transactions means that the market there will take a long time to recover.

“In contrast whilst we have experienced a moderate fall in house prices a look at the numbers of properties on the market would tell you that the Scottish market is all set to go. We have a record number of properties on the market and all of the owners who are proposing to move have got their mortgage agreed in principle. 

“The problem with the Scottish Market therefore is neither lack of confidence in the economic situation nor lack of availability of mortgages.  After all, if those two issues were the problem we would have no properties on the market at all.

“The only problem we have is that sellers of properties quite rightly will not commit to a purchase until they receive an offer for their own property. The tipping point for the market will be when first time buyer confidence returns.

“We know that there are a lot of would be first-time buyers out there with sufficient funds behind them to cover the deposit they’d need to make a purchase. I believe that, once interest rates start to level out at record low rates and house prices remain constant for a couple of months showing the upturn is coming, they will realise that they need to act quickly to take advantage of the conditions before the market improves.

“The Government has been working hard to encourage lenders to pass on interest rate cuts and improve mortgage deals for buyers in recent months. My guess is that they will use the nationalised Banks to introduce first time buyer incentivised mortgage products to help improve lending levels and stimulate the market early in 2009.

“We won’t see an overnight recovery, but there is definitely light at the end of the tunnel.”

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