Gordon Fowlis, Regional Managing Director, Your Move, comments: “Prices fell marginally in December, but no further than you’d expect in the normal seasonal downturn. Although, given the wider economic backdrop, the market has done well not to contract a more serious bout of contagion.
“Credit should go to mortgage lenders who have done their best to sustain lending. They have operated astutely and picked their battles carefully, pushing out a raft of higher loan-to-value mortgages last summer, which has increased the trickle of first time buyers to a more steady flow. Although first time buyer numbers are still depressed by historic standards, this has prevented prices from falling more sharply, and has had a knock on effect of galvanizing the higher echelons of the Scottish market.
“But it won’t last forever. Prices have already fallen 2% since April 2010 and, if the economy slips into recession, the pace of decline will increase. The CIPD has warned that government cuts will cripple the economy. Buyers are understandably unsure which direction the economy will take, which will encourage more of them to sit tight during 2012. And the banks are terrified by the prospect of a further downturn in the eurozone, which will feed through into the mortgage market. This fear has already begun to manifest itself in the form of higher rates and is sure to mean a drop in net lending over the coming months. Finally, repossession numbers are predicted to grow and this will be magnified in Scotland, where a backlog exists, due to legal rulings that temporarily suspended Scottish repossessions last year. This will depress prices further. The spring market will be punctuated by more lending to wealthier buyers and buy-to-let investors – groups that lenders see as lower risk – at the expense of first time buyers.”
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