A leading north-east property solicitor has admitted that house sales in the region are “dire” – a week after saying the market was “enduring the recession comparatively well”.
The credit crunch, recession and introduction of home reports have sent sales in Aberdeen and Aberdeenshire to their lowest levels since the early-90s, the Press and Journal can reveal.
Last week Aberdeen Solicitors Property Centre (ASPC) chairman John MacRae said despite concerns about sales prices were holding up well.
However, last night he said sales at the end of last year and in 2009 had been dreadful and could get worse before the summer.
The average price of a property in the north-east, at £192,570, has risen above the UK average in recent weeks. But lurking behind that is a startling drop in sales which, for the first time in 15 years, have fallen below 1,000 for a single quarter.
Last night, Aberdeen University property expert John Bone warned that the unprecedented boom in the north-east housing market, fuelled by cheap credit, had ended and prices were on the verge of plummeting.
He said: “Figures from ASPC indicate that the local market has now entered a significant downturn, with sales over the last six months falling off dramatically, both from the peak of the market and from the longer-term trend.”
Between October and December 2007, solicitors within ASPC shifted 1,662 homes. However, during the same period in 2008, just 894 were sold, a 46% drop.
This is the first time since the early-90s that sales have dropped below 1,000 in any quarter, sparking claims that the north-east market is on the verge of a major decline.
Last night, Mr MacRae said the market was being hit with a triple blow and might not pick up until the summer.
“It’s either the credit crunch, or the recession, or the introduction of home reports,” he said.
“All three are having an impact and it’s not yet clear which is causing the most problems. The impact of home reports may be temporary as people get used to them.”
He added: “It’s pretty dire at the moment and it looks like it’s going to be worse in the first quarter of this year. This is because there was a surge in properties coming on the market before the home reports came in (in December) and a dearth since.”
Mr Bone warned that falling sales are a good indicator that prices are set to fall significantly.
He continued: “It is far from unusual, as has already been experienced across other regions of the UK, for there to be an extended period of price stagnation or slight decline before contracting sales and a slowing market are translated into more significant price falls.
“This occurs as sellers in a downturn are understandably reluctant to lower asking prices, and initially attempt to hold out for peak prices prior to eventually accepting that conditions have changed.
“Furthermore, Scotland, and indeed the Grampian area, appeared to lag behind the rest of the UK in terms of the initial upturn in prices and, consequently, there are good grounds for assuming that something similar is occurring with the correction.
“In addition, the oil sector – which is often cited as a key reason for higher prices in this area – now appears to be experiencing its own difficulties due to wider economic conditions.
“Against this background, observations that the local area is ‘bucking the trend’ and that average prices in the region are now above the UK average should be regarded with considerable caution.”