House prices in Scotland continued to rise through the last quarter of 2022, but at the slowest rate since mid-2020.
the latest Royal Institution of Chartered Surveyors (RICS) residential survey showed a net balance of +8% of respondents reporting that prices had increased over the last three months, down from +31% in November and +70% in May.
This is compared to the UK average of -42% in the latest report.
Looking at price expectations, a net balance of -41% of surveyors in Scotland expects prices to be lower in the first quarter of 2023. This compared to the national average of -66%.
So while respondents in Scotland anticipate that prices will fall, their outlook is less pessimistic than surveyors in other regions of the UK.
In terms of demand, new buyer enquiries in Scotland fell for the eighth consecutive month with a net balance of -43% of respondents seeing a fall in demand. New instructions to sell also continued to decline with a net balance of -51% of respondents stating that there was a fall in stock levels through December.
With limited demand, and limited supply, this led to a fall in sales with a net balance of -55% of respondents in Scotland reporting a fall in newly agreed sales. This may also be weighing on the outlook, with a net balance of –39% expecting sales to fall in the first quarter of 2023.
The December survey also included a set of additional questions to respondents across the UK looking at the impact of energy efficiency ratings on buyer behaviour.
When asked if respondents are seeing greater interest from buyers in homes that are more energy efficient, around 40% of the survey sample answered yes, although this was outweighed by 60% who said they do not see this trend.
Meanwhile, 41% of respondents noted that sellers were attempting to attach a price premium on homes with a high energy efficiency rating. By the same token, 61% of contributors stated that highly energy efficient homes were holding their value in the current market.
Greg Davidson, a chartered surveyor from Graham + SIbbald in Perth, commented: “The market continues to be seasonally affected and as we come out of the festive break, it will be interesting to see how it responds.
“Although market conditions are slightly more challenging there remains an unsatisfied demand.”
Ian Morton, principal at Bradburne & Co in St Andrews, said: “The traditional slow down in the market for the Christmas break and the addition of the uncertainty in the Scottish economy has meant the sales market has slowed.
“Early indications show sellers coming to the market in January and that is a positive sign.”
Simon Rubinsohn, chief economist at RICS, said: “The latest survey highlights the emerging challenges in the housing market as new buyers grapple with more costly finance terms and uncertainty over the outlook for the economy.
“This is reflected in forward looking RICS indicators around both prices and activity. However, some signs of an easing in inflation pressures more generally could provide a chink of light particularly for those looking to take their first step on the property ladder.
“Meanwhile feedback around the lettings market once again demonstrates the need for some concerted thinking about how to create a thriving sector that caters for both the private and ‘affordable’ renter.”
Meanwhile, the latest Office for National Statistics (ONS) data showed that property prices increased by 10.3% in the year to November, slowing from 12.4% annual growth in October.
The typical UK house price in November was £295,000, which was £28,000 higher than a year earlier, but a slight decrease from the previous month’s record high of £296,000.
Average house prices increased over the year to £191,000 in Scotland.
The report said that recent annual percentage changes in house prices have been volatile because of volatility in prices in 2021 amid changes to stamp duty.
ONS head of housing market indices Aimee North said: “Annual house price inflation, measured using final transaction prices, slowed in November.
“There were also monthly decreases for average house prices in England, Wales and Scotland, although the average UK house price remains higher than the same period a year ago.
“While London remains the slowest growing English region, Scotland’s annual growth was slower than London.”
Private rental figures released by the ONS showed prices paid by UK tenants jumped by 4.2% in the 12 months to December 2022, accelerating from 4% in the 12 months to November 2022.
The latest figure was the largest annual percentage change since the records started in January 2016.
Annual private rental prices increased by 4.4% in Scotland over the 12 months to December.
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