House prices rising in Scotland due to lack of supply
Demand is outstripping supply in the Scottish residential property market with the result being a rise in house prices, says the latest survey from the Royal Institution of Chartered Surveyors (RICS).
It points out that a continued lack of properties coming onto the market has failed to stem the tide of prospective home buyers and the supply of new homes coming onto the market has been behind new buyer demand since April 2013.
The monthly survey shows a net balance of 31% of chartered surveyors reporting an increase in prices in May.
In the month that saw UK house prices reach record levels at £186,512 and greater lending restrictions begin to impact the market, respondents reported that in Scotland the scaling back in the provision of mortgage finance has been a little less marked than elsewhere.
The average Loan to Value (LTV) ratio in Scotland among first time buyers dropped to 86% from 88% in April but it remained more resilient amongst other types of borrowers. More modest expectations for growth are visible in the longer term as respondents’ expectations for Scottish house prices over the next 12 months dropped from 3.2% to 2.2%, the lowest since November 2013.
With Home Report instructions increasing and house sale prices on the rise there is growing optimism within the market that the summer months will be strong from a business perspective. April also saw an increase in activity within the rental sector with a net balance of 44% of respondents predicting a rise in rent prices during the next quarter.
‘The lack of supply teamed with continued growth in demand is resulting in higher prices across the country. There is some evidence to suggest that the Mortgage Market Review (MMR) has contributed to a modest tightening of the funding market, despite this, the pattern looks set to continue in the short term, with a net balance of 32% of respondents predicting an increase in sales during the next quarter,’ said Sarah Spiers, RICS Scotland director.
‘The Scottish Housing Commission will publish its report on the Scottish housing market in July. It will make practical recommendations to public policy makers and industry leaders to help improve Scotland’s housing market across all tenures, this will include addressing the current lack of supply within the market,’ she added.