Are we moving towards a Scottish house price bubble?

Are we moving towards a Scottish house price bubble?

Are we moving towards a Scottish house price bubble?

Amidst all the hustle and bustle of potential independence for Scotland it seems that demand for Scottish property is moving higher and higher. This comes at the time of the year, i.e. wintertime, when the supply of property to the Scottish property market tales off leaving buyers to scramble over what stock is left. As a consequence, some estate agents across Scotland, especially those in the Edinburgh area, have cited a potential Scottish house price bubble in the short to medium term specifically because of growing demand and a reduction in housing stock.

While the ongoing UK property recovery began in London it has now spread to other areas of the UK and even out with areas such as Edinburgh which is one of the main movers and shakers in the Scottish property market. So, are we on the verge of a Scottish house price bubble?

Finance is now more available

The UK government’s “Help To Buy” scheme has led to significant demand for property across many areas of the country. Indeed the Council of Mortgage Lenders has released a report this week estimating that mortgage lending will increase from £170 billion this year to £195 billion next year and £206 billion in 2015. When you bear in mind the fact that the ongoing increase in property prices has arisen during a period when banks have been ultra-cautious, what can we expect in the future?

Quote from : “Despite the pessimists suggesting that the UK housing market is approaching “price bubble” time it seems that confidence in the UK market has never been higher.”

As UK property prices continue to move higher and UK banks continue to repair their balance sheets we should see the release of more mortgage capital in due course. Indeed the “Help To Buy” scheme has helped prop up the UK property market although unfortunately this has come at a time when the market itself is showing underlying strength.

Should we be worried about Scottish property prices?

When we see an increase in demand and a reduction in housing stock this can cause a short-term spike in property prices. Indeed this is an issue we have seen in many parts of the UK, and indeed many parts of the world, over the last couple of years. While there is no doubt that demand is picking up it is worth noting that 60% of all properties in Scotland are currently selling for less than their original valuation. So while there is demand for Scottish property it seems that savvy investors are still not willing to pay over the odds.

Indeed when you also take into account the fact that household income across the UK is also under pressure perhaps we are being overly concerned about a situation which should rectify itself in the New Year. One of the traits of the worldwide property market is the lack of available stock in the run-up to Christmas and early New Year. This is a situation which will unwind itself once the holiday period is over and people start to put their properties back on the market. We should therefore see some steam taken out of the Scottish property market in early 2014 and this should allay any fears of a house price bubble.

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