Property cools

Housing market softens as borrowing costs rise

For sale, sold, homes, housing, property

Housing sales have slowed but prices are rising (pic: Terry Murden)

More evidence has emerged that Scotland’s housing market is cooling as home buyers face another hike in the cost of borrowing.

Prices are still rising but both demand and supply levels fell further into negative territory in the latest survey, according to the Royal Institution of Chartered Surveyors (RICS) Residential Market Survey.

It said there was a fall in new buyer enquiries and new instructions to sell compared with the previous month.

Respondents in Scotland are more positive about the 12-month outlook compared to UK counterparts, with both sales and prices expected to rise.   

The slowdown is attributed in part to the rising cost of borrowing and the Bank of England is expected to raise interest rates by a further 25 basis points from 4.25% to 4.5%, its 12 consecutive monthly rise.

Commenting on the survey, Ian Morton, of Bradburne & Co. in St Andrews said: “The market is slowing down, with sales closer to home report values and purchasers being more cautious in their approach”. 

Thomas Baird of Select Surveyors in Glasgow added: “We are finding a definite slowdown in the number of home report instructions compared to this time last year. Factors include higher interest rates and reluctance to sell properties with tenants in anticipation of changes to Government legislation regarding Scottish tenancies in September.” 

Commenting on the UK picture, Simon Rubinsohn, chief economist at RICS, said: “Indicators of the level of new housing starts in the early part of the year suggests that the picture is if anything continuing to soften as housebuilders activity reflects both macro uncertainty and policy developments.” 

Quarterly figures from Rettie, published yesterday, show the Scottish housing market has held up relatively well in the face of economic headwinds.

Q1 2023 figures, charting the first three months of the year, reveal that year-on-year house prices increased by 3.8% while the overall number of transactions was down by 11%. 

Overall turnover on the value of property sold across Scotland dropped to £4.1 billion (Q1 2022: £4.4bn), with total number of transactions down to 19,124 (Q1 2022: 21,496).  

The figures suggest prices rising faster than the UK average revealed by Halifax on Tuesday which pointed to sluggish growth.

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