FEARS have been growing over Britain's house price bubble since before the collapse of the US subprime market, but many experts have insisted Edinburgh is likely to escape the worst of any downturn.
High employment, historically steadier price growth and fewer high-value mortgages have led commentators to suggest the capital's property market would be sheltered from sudden downturns.
But indisputable evidence of the impact of the credit crunc
h on Edinburgh came yesterday with figures which reveal price growth is at its lowest rate for 15 years.
The average price for the first quarter of 2008 was £210,123, an increase of just 1.2 per cent.
The report, from the Edinburgh Solicitors Property Centre, also stated that there had been a 6.7 per cent fall in the number of property sales.
Ron Smith, the ESPC chief executive, said "a number of factors" were responsible for the cooling. "Foremost among these is a reduction in affordability, largely stemming from consistently high inflation in recent years.
"The credit crunch has also meant that buyers are finding mortgage deals may be more expensive than at this time last year, which puts a further constraint on demand." He said the current trend was likely to continue throughout the year, with inflation expected to stand at about 2 to 3 per cent in the city centre and 3 to 5 per cent across east central Scotland.
Robin Stimpson, the ESPC's chairman, added: "Over the last few years consistently high levels of growth have meant some people started to consider inflation in excess of 10 per cent to be the norm.
"Clearly this is not the case, and that rate of inflation simply would not be sustainable over the longer term. The credit crunch has certainly had an impact on demand, but the market was due to see a period of stability, and these figures are largely reflective of that."
The figures show that the affluent areas of Marchmont and Bruntsfield have been worst hit. Two-bedroom flats there have dropped in value from an average of £274,659 in the first quarter of 2007 to £260,078 in the first three months of this year.
However, four-bedroom detached properties in the suburbs continue to rise above inflation.
They have gone up by 13.8 per cent, from £360,681 to £410,630.
Andrew Rettie, a partner in Strutt & Parker responsible for its estate agency activities in Scotland, said it would be "naive" to believe Edinburgh could be immune to any downturn in house prices, but added: "I would say the demand for housing in central Edinburgh is less open to be affected by a downdraft – if there is to be one – than, say, the provincial regions of Scotland.
Although there appear to be wild swings in the markets around Edinburgh – with Falkirk averages up by 38.9 per cent and Kirkcaldy down by 23.3 per cent – these are probably down to anomalies created by the small number of total sales.
The full article contains 512 words and appears in The Scotsman newspaper.
