A fundamentally sound Scottish market is being challenged by a serious reduction in mortgage products available to home buyers and, should this continue, the consequences for sellers will be falling prices says DM Hall, a leading firm of Scottish chartered surveyors in a new report.
According to the report the supply of houses on the market is now at its highest level since the mid 1990s and people continue to want to move house since the current level of properties coming onto the market indicates the number of homeowners looking to move has not decreased.
But the limited mortgage products available in the market place has resulted in the most serious reduction in money supply in the economy for several decades. One year ago there were approximately 15,000 mortgage products available in the market place; today, lenders have withdrawn to the point where there are only just over 4,000 mortgage products available. As a result, lenders have become risk averse with loan to value (“LTV”) and income multipliers reduced significantly.
Alasdair Seaton, a partner in DM Hall, said: “Many sectors of the housing market have slowed down quite markedly. The supply of properties on the market is outstripping demand in most sectors and we are beginning to see a number of transactions collapsing because purchasers are unable to obtain appropriate mortgage funding”.
He continued: “Despite the over supply situation producing downward pressure on prices, in most sectors, this has not yet borne through in sale prices being achieved. Sellers often refuse to accept offers below their expectations so price reductions only become evident when people have to sell or are in the repossession market. It can therefore take a long time before the real effect of downward pressure on prices becomes evident”.
DM Hall’s report says market evidence indicates that the volume of sales transactions has dropped significantly during 2008 and predicts this level is currently about 30% below the same period in 2007 and may well fall further. It expects downward pressure will result in lower prices in some sectors as the year progresses.