Home Biz Tech Property

Demand for flats is high across Scotland

There’s been a gradual but steady change in the Scottish property market. In the past few years, a growing number of homes have been offered at a fixed price, rather than the ‘offers over’ pattern which prevailed in the decades before. Now, there’s growing evidence that a more deep-seated change has taken place with a report claiming that the gap between what people hope to sell their houses for and the price they actually achieve has narrowed.

Demand in Edinburgh outstrips supply

Demand in Edinburgh outstrips supply

The survey was carried out by the property website, S1homes. It looked at the average asking prices with those officially registered at settlement. On average, properties sold for about £4,000 less than their asking price. However, the average selling price did rise by more than £8,500 to £161,748 in the third quarter. In other words, it found that the “reality gap” had narrowed from 9% to 2% in that period, driven mainly by what buyers were prepared to pay rather than a drop in prices.

However, there were significant variations between the top and bottom of the market. Flats for instance continue to perform well across Scotland. Many of them sold on average for more than 17% (or £19,000) above their advertised price. By contrast, many detached properties failed to meet their asking price.

According to S1homes commercial director, Ewan Stark, “this quarter’s report shows that there have been significant changes taking place in the property market. Buyers are now prepared to pay more than they have been for quite some time and that, coupled with a slight decline in average asking prices, is what has led to the upsurge in the volume of properties being sold.”

Robert Carroll of Mov8

Robert Carroll of Mov8

However, estate agents in Edinburgh are warning that there could potentially be a mini property bubble in the capital. House prices and indeed sales volumes have been rising, but supply has not kept pace and the shortage could push prices higher. Over the past year, sales volumes have risen so dramatically that some Edinburgh property is now being worth more than it was before the 2008 crash. With demand remaining high, a lack of supply could push prices even higher.

Robert Carroll, managing director of MOV8 Real Estate in Edinburgh, explained that traditionally, the winter months were always perceived as a bad time to sell, “but that’s simply not true now. More and more buyers are going online from the comfort of their own homes during dark evenings to search for properties to buy. With sellers holding off putting their properties on the market until next Spring, that could prove a problem when buyers are continuing to look.

“The properties that are on the market at this time of year are selling far quicker. Proportionately, far more properties sell at this time of year than at any other.” He advises buyers who were looking for a new home in October and hoping to be in before Christmas, not to stop looking just because it’s a new calendar month.

As well as the latest figures from Registers of Scotland, the local property marketing agency, ESPC, is also reporting that agents across Edinburgh are experiencing the same thing. Its spokesman, David Marshall, pointed out that 2013 saw a substantial rise in market activity “but at this stage, the rate at which buyer activity is rising has outstripped the rate at which sales activity has grown.”

In the third quarter of the year, the number of homes sold in Edinburgh rose by more than 40%. By contrast, the number coming onto the market had only increased by 15%. As Mr Marshall explained, “overall there’s no question that the market conditions are more favourable for sellers than has been the case for a number of years. Those who are realistic in the pricing of the property are enjoying notably greater success in finding buyers.”

Carol agrees, adding that his firm had beaten all previous company records for sales this quarter alone, but added that “we’re starting to reach critical levels. Very soon will run out of properties to sell!”

Demand outstrips supply for homes

A report from the Royal Institution of Chartered Surveyors (Rics) has claimed that a growing number of Scots are putting their homes onto the property market, with “positivity” seen across the country. Last month, 48% more surveyors reported increases rather than decreases in new instructions – up from 24% in July; but 73% more surveyors reported growing numbers of enquiries from potential buyers meaning that there’s an imbalance between supply and demand.

Robert Carroll of Mov8

Robert Carroll of Mov8

Looking ahead, a growing number of 43% more surveyors said they expected to see price growth in Scotland over the next three months. As director Sarah Speirs explained, “we are starting to see more people return to the housing market. There are buyers out there and prices are edging upwards. It is important, however, that prices do not rise to such an extent that they become unaffordable.”

That view is shared by Robert Carroll of the Edinburgh-based solicitors and estate agents, Mov8. “Over the past year,” he said, “we have seen a steady incline in buyers coming to market so our findings are in line with the latest RICs report. We are seeing more properties selling in a far shorter time scale than we have for years, which is fantastic news, but there is still not enough to cope with buyer demand. We are coming into a time of year where traditionally we see more buyers come to the market. Let’s hope that more sellers will take advantage of this so that the demand can be met.”

No fewer than three reports this morning paint a positive picture of the Scottish economy.

Lord Green Trade & Investment Minister

Lord Green
Trade & Investment Minister

Official figures from the UK government point to growing numbers of direct foreign investment in Scotland – up by 16% in the past year, slightly more than for the country as a whole. According to the Trade and Investment Minister, Lord Green, the figures are “a vote of confidence” from foreign investors, confirming that the UK remained a world-leading business destination.

“Attracting foreign investment,” he said, “is an important element of the UK government economic growth programme and UK TI will continue to work with companies to help create and sustain a globally attractive, highly competitive and truly international economy.”

John Swinney MSP Finance Secretary

John Swinney MSP
Finance Secretary

In a statement, the Scottish government said that the figures showed that the independence debate had not deterred investors. In the view of Finance Secretary, John Swinney, the report provided “welcome recognition that Scotland is out-performing UK securing inward investment. This report is the Scotland reported record numbers of FDI projects in 2012/13, which demonstrates the continued attractiveness of Scotland as a place for investment and growth as we approach the referendum.”

The second report comes from the CBI. Its latest Scottish Industrial survey reports that optimism amongst manufacturers had “turned positive” for the first time since it over last year. The volume and deliveries of exports had increased in the last three months and, looking ahead, the prospects for future orders and output had also increased. But by contrast, the number of new domestic orders had fallen for the fifth consecutive quarter.

The director of CBI Scotland, Iain McMillan, said that the results showed “a continuing trend of exports from Scotland performing fairly well. However, manufacturing industry in Scotland still faces a difficult economic environment in home markets, although the survey suggest the situation may be improving.

Iain McMillan CBI Scotland Director

Iain McMillan
CBI Scotland Director

“There is much that the government can do,” he added, “to assist manufacturers and become a more effective catalyst for growth. The UK and Scottish governments need to put growth at the very heart of their agendas and ensure that all areas of government are properly aligned towards achieving this overarching objective.”

The third report deals with the construction sector in particular – one that has been languishing in the doldrums for many years. Produced by the Royal Institution of Chartered Surveyors, it suggests that the sector may be “turning the corner” with a number of new projects beginning to rise in the level of activity “edging upwards”. In the most positive reading since early in 2008, the survey recorded an 11% rise in the number of its members reporting an increase in workload in the second quarter of this year.

RICS LogoMore significantly, surveyors across Scotland were no more positive in our outlook for the future with a third of them suggesting that the workload would continue to rise. There were clear indications that the sector’s collapse in profitability could be starting to turn round with almost a quarter of surveyors believing that the prospects for job opportunities in the sector would rise in the coming year. But in a note of caution, RICS suggested that this latest evidence was simply an indication that, across the UK, the sector was “beginning to regain some composure rather than anything even remotely close to a return to form.”

Scotland is facing a housing crisis. The country has a rapidly expanding population — one report suggested that there could be as many as 200,000 households across the country by 2020. To meet this demand, the Scottish Government set a target of building up to 20,000 extra homes a year. But over the past five years of the credit crunch, the construction industry’s all but collapsed. A few weeks ago, official figures confirmed that house building was at its lowest since the Second World War. There’s a clear need for imaginative solutions.

Deputy First Minister Nicola Sturgeon

Deputy First Minister Nicola Sturgeon

Two years ago, the then Scottish Housing minister, Alex Neil, admitted that the Government in Edinburgh faced “major challenges stemming from the credit crunch and the savage cuts inflicted by the UK Government. Scotland needs many more new houses,” he said, “and to significantly enhance the quality and sustainability of our existing housing stock.”

The evidence to date is that it hasn’t happened. There have been changes in policy. Last week’s announcement about the abolition of the right to buy in Scotland is part of that. The Deputy First Minister, Nicola Sturgeon, claimed that thousands of people would benefit from improved access to social housing as a result. It’s thought that up to 15,000 social houses will be protected from sale over the coming decade.

Now, the private sector is taking matters into its own hands. The industry body, Homes for Scotland, has announced the appointment of experts in housing finance from the world renowned Cambridge Centre for Housing & Planning Research and LSE London to assist a sector-led group to identify and attract new sources of investment to help expand Scotland’s rental sector.

Philip Hogg Homes for Scotland

Philip Hogg
Homes for Scotland

The expert project team, which will include support from the Scottish Government, Scottish Development International and Construction Scotland, believes that targeting pension funds and other institutions could help deliver new, high quality, sustainable homes at significant scale, protecting jobs and stimulating activity in the home building sector.

Homes for Scotland Chief Executive, Philip Hogg, argued that “The rental sector has a key role to play in meeting Scotland’s diverse housing needs but, given continuing economic constraints, we need to look at ways we can attract additional finance to help increase housing investment. To do this effectively, we first need to fully understand the needs of investors and develop an approach that will attract them to the Scottish residential market. This is what the team from the Cambridge Centre for Housing & Planning Research and LSE London will be assisting us with.”

The two institutions regard the challenge set for them will be tough.

The Right to Buy social housing like these has been abolished

The Right to Buy social housing like these has been abolished

As Professor Peter Williams of the Cambridge Centre for Housing & Planning Research stressed, “Institutional investment is an issue of great importance and this research will help to clarify the opportunities available to encourage significant, sustainable investment in Scotland’s rental sector.” His colleague, Professor Christine Whitehead from LSE London, added that “whilst it has proved challenging to get institutional involvement in the past we are encouraged by the prospect of a changing environment in which to develop and grow this vital sector.”

The project’s been welcomed by Nicola Sturgeon. “This industry-led project will look at ways to attract additional finance into the house-building sector,” she said, “by targeting pension funds and other institutions. Through identifying and seeking to overcome barriers to securing this investment the project has the potential to unlock millions of pounds of new finance, support jobs and boost the supply of new, high quality rented homes across Scotland.”

Today’s official figures show a worrying trend for the housing sector. The total number of new homes completed fell for the fifth year in a row which means that the past year was the worst since 1947. Only 14,877 new homes were built across public and private sectors in 2012, a drop of over 42% on 2007.

Philip Hogg Homes for Scotland

Philip Hogg
Homes for Scotland

Philip Hogg, Chief Executive of trade body Homes for Scotland, pointed out that around “465,000 new homes are needed in Scotland by 2035 to meet demand. However, the build rates highlighted today,” he said, “point to a potential shortfall in the region of 140,000 by this time when there are currently already significantly more people than that on housing waiting lists. Clearly this would only exacerbate Scotland’s housing crisis and highlights the need for further intervention by the Scottish Government to help reverse this downward trend.”

House building now at its Lowest since 1947

House building now at its
Lowest since 1947

The drop in completed new homes was most marked in the private sector. These have fallen by 55% between 2007 and 2012. The news prompted Michael Levack, Scottish Building Federation Executive Director, to describe the trend as concerning. “The fall in rates of private sector house-building does at least seem to be slowing down. But such a steep fall in public sector house-building activity at the beginning of this year must be a cause of concern. As we gear up for the Chancellor’s 2013 spending review later this month, I hope these numbers will add further weight to the calls being made for a reversal in cuts to capital spending.”

Graeme Brown Shelter Scotland

Graeme Brown
Shelter Scotland

However, Graeme Brown, Director of Shelter Scotland, acknowledged that the figures showed that “the Scottish Government appears to have delivered on its target to complete 4,000 new social homes during 2012-13, and we welcome that progress. However, a sharp drop in the number of new social homes approved for construction and a drop in the number of units where construction has actually started, will complicate efforts to deliver the pledge in each of the remaining years of the parliament.”

Michael Levack agreed, arguing that, with demand for affordable housing at a record high, “building more homes ought to be a major political priority. Bolstering capital investment in housing would provide the pipeline of work construction companies need to rebuild capacity and jobs and to offer more high quality apprenticeship opportunities within the industry. At the end of the day, house-building should be seen as a major catalyst of economic growth – and government funding priorities need to reflect that.”

Michael Levack Scottish Builders Federation

Michael Levack
Scottish Builders Federation

Philip Hogg from Homes for Scotland pointed out that while the MI New Home mortgage indemnity scheme “is making a positive impact in helping people step onto and up the property ladder as well as relieving pressure elsewhere in the system, today’s figures are a stark reminder that, and as the Housing Minister herself notes, operating conditions remain very challenging for house builders. They also illustrate the need for the Scottish Government to bring its equivalent Help to Buy shared equity scheme to market as soon as possible and to refrain from proposals to increase regulation and cost which we believe will only further depress housing supply.”

Looking forward, Graeme Brown of Shelter Scotland drew the worrying conclusion that there were few signs of optimism, adding “To deliver the Scottish Government’s pledge to build 4,000 homes for social rent in every year of this parliament an ongoing pipeline of shovel ready sites for social house building is required. Today’s figures show that approvals have fallen by 38 per cent from last year. The 18 per cent drop in the number of approved sites where construction has started raises further worries that the Scottish Government is not building quickly enough to maintain the capacity and skills in the workforce that rely on social house building for employment.”

By Robert Carroll
Managing Director of MOV8 Real Estate

Estate agents in Edinburgh and the Lothians are reporting a ‘property drought’ for the first time in years. We’ve seen the proportion of properties being sold each month increase significantly, causing depleted stocks and a shortage of good properties being available for property buyers.

In our own experience, we’re seeing quality houses flying off the shelves. Family homes are always popular so larger properties in good areas are still attracting multiple offers and often achieving more than the Home Report value. We are also finding that many of our sellers are becoming far more realistic about pricing. If things continue this way we will very soon end up in a position where we have nothing to sell!

The appetite of buyers also seems to be increasing as a result of improved mortgage lending conditions; they seem to have more confidence that the worst of the poor property market conditions, witnessed in the past few years, is over. In the past three months, we have sold considerably more properties than we’ve put on the market. However, while the number of properties being sold has gone up, the number of new properties coming on to the market has remained fairly steady. As a result, we had 40% fewer properties available at the beginning of February than at the end of October.

Other firms share our view. Richard Loudon of Simpson & Marwick told us that they had sold a higher proportion of their properties in January 2013 than in 2012. “Statistics,” he said, “back up the fact that more properties are selling now and we believe that that is because sellers of the slightly less sought after properties are being more realistic about the price that they will accept.”

At MOV8, we believe that the bad weather at the beginning of the year had a large part to play in people deciding not to bring their property to the market, even though buyers are returning. It’s a view shared by David Marshall (below), spokesman for the ESPC, who told us that the statistics are there to back it up.

“Over the last three months,” he explained, “sales in Edinburgh have risen by 9% annually whilst the number of homes coming onto the market has remained relatively unchanged. Total sales during the last three months of 2012 were at their highest level for the fourth quarter since 2007. This increase in sales has been helped by sellers showing an increasing willingness to negotiate on price.”

As with all markets, supply and demand affects pricing. If demand continues to outweigh supply, with buyers having more desire to buy properties than sellers have confidence in their properties’ abilities to sell for the prices that they want, it could cause a shortage of quality properties. This could start to drive prices up again, particularly in types of properties or areas where there is limited supply and high demand such as the market for good family homes.

The good news for the market more generally is that we’re seeing far more First Time Buyers coming in. So as well as the perennially-popular family homes, more new buyers are snapping up great deals on less expensive properties too. Finally, we’re also seeing a return of property investors to the market.

With mortgage rates continuing to fall, particularly for those with lower deposits, we are seeing a rise in mortgage applications from First Time Buyers and also from investors seeking Buy To Let mortgages. Compared to January 2012 we have experienced a significant rise in applications.

So is it likely that estate agents will run out of properties to sell if things continue this way? I honestly don’t think it will get to that. However, with less competition from other properties for sale, all we know is that these market conditions are very favourable for sellers and that, if you have a quality property and are realistic about the asking price, this really is a great time to be selling.

For more comment please contact Robert Carroll of Mov8 Real Estate on 07920 101241 or email [email protected]

The headlines claim that the Edinburgh property market in particular remains healthy. Certainly, there are people queuing to buy some of the more desirable houses in the Capital. But scratch beneath the surface and a different story emerges. There’s a shortage of first time buyers – and even a reluctance on the part of some younger professionals to contemplate buying a home, preferring to rent so they can quickly and easily follow the jobs around the country or even around the world.

Richard Loudon of solicitors Simpson & Marwick has been following developments in the property sector for over 30 years. He shared some of that experience with members of the Power Lunch Club and afterwards told the Caledonian Mercury why, amongst other things, he despises Home Reports:

Tormore Forest <em>Picture: John Knox</em>

Tormore Forest Picture: John Knox

By John Knox

A wood on the Isle of Skye has become the latest community land buyout in Scotland. And although the pine trees may not know it, they have joined a new experiment in community living in which the Big Society is becoming the Small Society.

Tormore Forest near the southern tip of Skye has been bought from the Forestry Commission (FC) by the Sleat Community Trust (SCT) for £330,000. The community itself has contributed just £16,000 – but, cleverly, it has borrowed half the total sum from the bank and will be repaid by harvesting some of the mature trees already growing in the forest. Grants from Highland Council and the Scottish government made up the rest.

Supporters of the buyout – and only seven of the 350 local householders voted against it – say it’s a “win-win” proposition. The FC gets £330,000 to invest in new forests elsewhere. The SCT can go on to develop the forest for fuel, timber, recreation, school projects, tourism etc on its own terms. And the council and the government get rural development for a fraction of the cost of doing it through state agencies.

Reassuringly, the SCT is no fly-by-night amateur organisation. It already runs the village shop and post office at Armadale, a local repair garage, a woodchip business, a machine-hire operation, a taxi service, a tourism agency – and it’s considering building a 900kW windmill on top of a local hill. It has just won the Queen’s Award for Voluntary Service. This is the prime minister’s Big Society in action, except it’s a small society of just 350 people.

These 440 hectares of forest are just the latest example of localism in a country which is gradually reclaiming its land from the mighty landlords of the past. Over 100 community land buyouts, involving 200,000 hectares, have been made since the Scottish parliament passed the Land Reform Act in 2003. This has allowed communities in places such as Assynt, Knoydart, Harris, Gigha and Rum to buy their estates and develop them for themselves. Woodlands, golf courses, churches, a youth hostel – even an avenue of trees – have all been bought by the communities living around them.

So far, all buyouts have been amicable affairs, with the landlord willing or persuaded to sell. But the 10,000-hectare Pairc Estate on Lewis appears to be the exception, with threats of court action by the landlord, a Warwickshire accountant whose family have owned the estate since the 1920s. The Daily Telegraph, predictably, has called the islanders’ attempt to buy the estate a Mugabe-style land grab.

David Cameron, chair of the umbrella body Community Land Scotland, would presumably disagree. His organisation believes that land-ownership by communities increases its value as a source of jobs, revenue and services – and what is called “social capital”, the ability of communities to help themselves. Two recent studies have backed this up: one from the Scottish Agriculture College, the other from the Perth-based Centre for Mountain Studies.

The other David Cameron, he of the Big Society, would presumably agree that services being run by local trusts is a good thing. The problem seems to be making the model work across the country, not just in the Highlands and Islands. The key, and frightening, element is ownership.

Making people feel they are the owners of their local school or park or forest or factory or street seems to bring out their commitment and hard work. In the Highlands, that can be done village by village. In the cities, it is being attempted by councils but it may, in the end, have to be done by neighbourhoods. It depends how small we want the Big Society.

Donate to us: support independent, intelligent, in-depth Scottish journalism from just 3p a day

<em>Picture: Nigel Mykura</em>

Picture: Nigel Mykura

The latest Scottish House Price Monitor from Lloyds TSB Scotland suggests that Scottish house prices are almost identical to four-and-a-half years ago. But in the three months to the end of July, the quarterly price index for the average domestic property in Scotland fell by 3.7 per cent.

The average Scottish house price is now £152,565, though there are wide variations across the country. With an average price of almost £230,000, Edinburgh remains the most expensive part of Scotland in which to buy a house, with Aberdeen second at nearly £208,000.

By contrast, the areas around Perth and Kinross and stretching west into the old Central Region are the most depressed, with an average price of just over £127,000, followed by Glasgow at around £130,000. However, there is some encouragement from an increase in activity in the housing market which had been very low during the winter months.

These latest figures show what the report calls a “sizeable increase”, with the number of houses purchased recorded 27 per cent up on the previous quarter – though these are still well below pre-recession figures.

Donald MacRae, the chief economist at Lloyds TSB Scotland, said that the Scottish economy “exited recession at the end of 2009 with a rise in output of 0.1 per cent. After four quarters of rising output, gross domestic product fell in quarter four at the end of last year, followed by a slight rise of 0.1 per cent in the first quarter of 2011.

“Consumer confidence remains low due to high levels of retail price inflation in excess of increases in earnings squeezing disposable income,” he said. “The Scottish housing market did experience the normal effect of spring this year on sales and purchases, but the impact was muted. The number of transactions increased from the depressed levels of winter but remained below the levels of one year ago. The Scottish housing market awaits a resurgence of both business and consumer confidence for a faster recovery.”

One option for people looking to enter the housing market could be through low cost home-ownership schemes (LCHO). Another report, this time from the Halifax, points out that such schemes have faced significant challenges since the recession, but are a vital part of the housing market, especially in the provision of affordable homes.

In the last five years, almost 45,000 new homes have been built under various LCHO programmes. And last year, the number of new LCHO homes represented around 13 per cent of total private enterprise and housing association sales. The concept includes helping people to enter the housing market through shared equity and shared ownership.

This has been promoted by governments of various political persuasions as a way of supporting those families and individuals who couldn’t afford to buy on the open market without assistance.

However, even those schemes are pointless without homes for people to buy and a Progressive Scottish opinion poll suggests that building new homes for those on housing waiting lists is the Scottish public’s number one priority when it comes to investing public money in the construction sector.

In the poll, commissioned jointly by the Scottish Building Federation and the Chartered Institute of Building Scotland, 39 per cent of those surveyed identified investment in new housing as their top priority for public capital investment.

Building new schools and repairing existing ones came out top of the second priority list, supported by 25 per cent of respondents, while building new hospitals was the most popular third priority, supported by 19 per cent of those responding.

By comparison, support for specific committed transport projects such as the Aberdeen Western Peripheral Route and the new Forth crossing was low. Only 1 per cent of people thought the latter was a major investment priority.

Even in those regions likely to benefit most directly from the project – Fife, Lothian and the Borders – the proportion of respondents identifying the new bridge as their top priority was no higher than 4 per cent.

According to Michael Levack, chief executive of the Scottish Building Federation, “This new opinion poll demonstrates those categories of investment that are most important to the Scottish public, and affordable housing is clearly top of the priority list. With the Scottish budget under some significant pressure, there can be no doubt that the Scottish government faces some extremely tough decisions about where to spend the money it has.

“If Scottish ministers were to allow funding allocations for housing, schools and hospitals to suffer because of a determination to press ahead with particular infrastructure projects funded purely through the public purse, this poll shows they would be seriously out of step with what the public wants to see their money spent on.”

Ken Morrison, chair of the Chartered Institute of Building Scotland, added that he hoped these results would “convince those holding the purse strings that increased investment in affordable housing is supported not only by people working in the industry. Alongside investment in building schools and hospitals, it is a key priority for a significant cross-section of the general public as well.

“The general public clearly wants the Scottish government to be more ambitious with the level of public investment it commits to building new homes,” he said. “That should also help to ensure that we build new housing to the high quality standards that people rightfully expect.”

Donate to us: support independent, intelligent, in-depth Scottish journalism from just 3p a day

Robert Gardner, Nationwide chief economist <em>Picture: Nationwide</em>

Robert Gardner, Nationwide chief economist Picture: Nationwide

The housing market throughout the UK remains firmly in the doldrums with little sign of any imminent recovery. The Scottish market in particular appears to be lagging behind the rest of the UK. That’s the conclusion to be drawn from a raft of statistics published in the last few days.

Take, for example, the latest Scottish House Price Monitor from Lloyds TSB Scotland. It reports that house prices here are now almost identical to those of four years ago. In the three months ending in April, the average price index for domestic property in Scotland fell by 3.6 per cent, and the number of sales is continuing to fall – 18 per cent down on the same quarter last year.

According to Donald MacRae, the bank’s chief economist, “The Scottish economy exited recession at the end of 2009. A slight fall in output in the first quarter of 2010 was followed by robust growth of 1.3 per cent in quarter two and trend growth of 0.5 per cent in quarter three, before a weather-induced fall of 0.4 per cent in the last quarter. Most indicators, including the Bank of Scotland PMI [Purchasing Managers Index], point to a resumption of growth in the first quarter of this year.

“The Scottish housing market has adjusted to the recession with a halving of sales and a period of volatile price movement over the last three-and-a-quarter years. Average house prices in Scotland are now very close to the levels of four years ago. Consumer confidence has fallen due to high levels of retail price inflation in excess of increases in earnings squeezing disposal income. The slow recovery from recession is being expressed in the housing market, principally through low levels of sales and a return to the prices of four years ago.”

Donate to us: support independent, intelligent, in-depth Scottish journalism from just 3p a day

These figures are largely confirmed by those from the Nationwide. It reports that there was a slight rise in prices last month (0.3 per cent), the price of a typical home is currently over 1 per cent lower than a year ago.

Robert Gardner, the Nationwide’s chief economist, shares MacRae’s view: “The property market is continuing to mirror the lacklustre trends evident in the wider economy. House prices increased by 0.3 per cent in May, only just offsetting the 0.2 per cent fall recorded the previous month, and leaving prices 1.2 per cent below the level prevailing in May 2010. At 0.6 per cent, the three month on three month measure of house prices was little changed from the 0.7 per cent pace of increase recorded in April.”

Commenting on these figures, Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors (RICS), added that they provided “further evidence of a largely stagnant residential market. This follows on from numbers on the level of transactions published earlier in the week by HMRC [HM Revenue & Customs] and the British Bankers’ Association, both of which showed a broadly flat trend in sales.”

Much of the lack of movement in housing has to do with consumer confidence. The latest figures from the Nielsen Company and the British Retail Consortium confirm a dramatic decline in this, with confidence in the UK dropping sharply despite growing optimism elsewhere in the world.

Its survey suggests that fears about job prospects are responsible, with three-quarters of British people believing that job prospects here were “not so good or bad”, versus a global average of 49 per cent. It also suggests that we are becoming a nation of savers. Despite low interest rates, the most popular thing to do with spare cash is put it into savings, with 34 per cent of respondents trying to save where possible. However, 30 per cent of respondents said that they had no spare cash, the highest percentage the survey has recorded.

In the view of Chris Morley, group managing director of Nielsen UK & Ireland, “The long hard winter and continuous media coverage of UK debt levels and cuts in the public sector are all taking their toll on consumer confidence in the UK. I would envisage a continuation of lower confidence as consumers are still being very cautious in their spending intentions.”

British Retail Consortium director general, Stephen Robertson, added that “nearly a third of people now say they have no spare money because households are suffering a squeeze between high inflation and low wage growth. In real terms, disposable incomes have fallen for the first time in 30 years. With inflation expected to rise further and average earnings showing only minimal growth, disposable incomes will be under continuing pressure for the rest of the year and beyond. The prospect of interest rates beginning to rise as the housing market weakens can only dent consumer confidence further over the coming months.”

That is backed up by some of the other, forward-looking indicators from the RICS Housing Market Survey. They suggest there is little reason to expect an improvement any time soon. This is the result of a combination of factors including uncertainty over the outlook for the economy. It also argues that an ongoing reluctance from the banks to make finance more readily available is continuing to cast a pall over the sales market.

“This would matter less if the availability of rental property, whether privately let or social, was increasing,” said Simon Rubinsohn. “The upward pressure on rents is a clear indication that this is not the case. Indeed, reforms to financing arrangements for social housing raises significant doubts as to whether new provision can keep pace with need. Although the mood music in government does seem to have shifted more in favour of development in recent months, it is absolutely critical that the rhetoric feeds through into actions. Failure to act is likely to result in the cost of all tenures of housing continuing to rise.”

That has worrying implications for all kinds of housing, emphasised by a report from the National Centre for Social Research (NatCen). Its latest publication, commissioned by the Halifax, suggests that Britain is moving towards to a generation of renters who are giving up on buying their own home. It claims that, if attitudes become reality, the shape of Britain’s housing market will be fundamentally changed within a generation.

Claimed to be “the most in-depth research into the attitudes and behaviour of young people toward home-ownership since the credit crunch”, the NCSR report found that 77 per cent of all young non-homeowners still aspired to owning their own home. Then comes the reality check: “despite this aspiration, nearly half of 20–45 year olds say Britain is becoming more like Europe where renting is seen as the norm and predict Britain will become a nation of renters within the next generation.”

The survey had a large sample – some 8,000 people aged between 21 and 40. It found a widespread perception that banks were not lending. Those interviewed were worried by the size of mortgage deposits necessary. They also found the application process daunting, effectively stopping them from making any significant attempts to buy a home. Only 5 per cent of this group reported that they were making sacrifices to save for a deposit, while 95 per cent said they had no spare cash, no interest in saving for a deposit or were trying to save but failing to do so.

“The phenomenon of ‘Generation Rent’ could have major socio-economic implications” said the report’s author, Alison Blackwell from NCSR. “It would mean fewer homeowners being able to buy and therefore fund the construction of the new homes required in the UK to meet demand, resulting in a slowing down in the housing market. It could open up a widening of the wealth gap that already exists between homeowners and non-homeowners. And people in Generation Rent risk insufficient finances at retirement.”

Her concern was reflected by Stephen Noakes, commercial director at Halifax Mortgages, who stressed that they were doing everything they could to help. “Our research indicates just how many potential first-time buyers are not making it to the application stage,” he said, “because of a fear of being declined. We would like to help aspirational home buyers to realise they do have options, that they can apply for a mortgage, and that it is still possible to get onto the property ladder.”

The research further emphasised that there were great challenges and no easy answers for first-time buyers. The size of the deposit was rated as the biggest single barrier to home ownership, and focus-group comments suggest this prevents people from saving at all. The response of the Halifax has been to launch what it’s calling the First Time Buyer Pledge. This includes a promise to publish a detailed overview of lending criteria both online and in branch.

“Our research indicates that first-time buyers are fearful of the application process,” Noakes said, “so we want them to know that, if they come to us, we can provide them with a personalised promise on how much we can lend them, without leaving a lasting record on their credit profile. In addition, if an application is turned down, we will provide customers with information as to why and, whether they are successful or not, we will provide them with a plan to move forward.”

Donate to us: support independent, intelligent, in-depth Scottish journalism from just 3p a day