Our housing market is not suffering same woes as England

Different system is protecting Scotland from trouble, says Steve Spence.

SCOTLAND'S unique and widely admired house-buying system is set to protect it from the property market woes affecting the rest of the UK. The Scottish contract process based on "missives" is the main reason why the Scottish housing market is remaining robust, while in England prices are falling and the spectre of negative equity is looming heavily over many homeowners.

We at ELPG believe Scotland should again escape largely unscathed from problems crippling the market south of the Border. The Scottish and English markets are separate entities and the fundamental principles affecting one don't apply to the other – particularly with regard to the dreaded "property chains". During the last property slump in 1989-1993, prices went through the floor in England but in Scotland they stayed the same and even in some cases showed a slight increase. The reason for this is the missive system which underpins Scottish property transactions.

In Scotland, house buying is governed by individual contracts not directly linked to any other transactions, as happens in England. An offer is submitted with a long entry date, several weeks ahead, and the purchasers are expected to conclude missives right at the start, on the basis that they will get their mortgage through before the entry date and sell their property with an entry date that hopefully corresponds. If one sale breaks down, only that one transaction is affected.

In England the system is completely different. Many transactions are inter-dependent and long property chains can develop. Only when every party in the chain is ready to go does the chain of transactions progress. If a first-time buyer's expected 100 per cent mortgage fails to materialise, as is being experienced now because of the credit crunch, it is possible for ten or 12 transactions to fall flat on their faces.

That creates unimaginable turmoil and instability in the market place. Panic reigns and prices are reduced to try to get property deals resurrected.

Statistics for the period January to March 2008 show that ELPG members sold more houses compared with the same period in 2007 – 802 compared with 787. In addition, the ELPG group also saw a huge increase in the numbers of people putting their houses on the market – 1243 in Jan-Mar 08, against 1089 in 2007.

It suggests confidence remains high among homeowners. While the market here may take a breather, we believe there's every reason to assume Scotland will escape unscathed from the current challenging conditions and continue to enjoy a robust property market.

We are a distinct market and it's wrong for people to assume what is happening in England will inevitably happen in Scotland.

• Steve Spence is a member of the Edinburgh and Lothians Property Group.