Things are looking up for price of city houses

HOUSE prices in the Capital have increased for the third consecutive month – but property experts today warned that increasing unemployment could yet cause future prices to plunge.

New data from the Edinburgh Solicitors Property Centre (ESPC) today showed that the average price of property in Edinburgh last month was £206,138 – 2.3 per cent higher than in April.

Despite the month-on-month rise, the average price is still 12.3 per cent lower than this time last year, when the average home sold for £235,050.

The ESPC expects the rate of the year-on-year decline to rise sharply in the next two months, as prices reached a high in July 2008. But it predicts that growth may return before the end of the year.

However, it warned that any further announcements of mass job losses in Edinburgh could cause another sharp decline in prices.

David Marshall, business analyst at the ESPC, said: "The figures are clearly encouraging from the perspective of sellers and homeowners but it is very early days to start to talk about the market turning the corner.

"There are a number of risks as we move forward, particularly with regards to unemployment."

He added: "Year-on-year falls will peak in June and July then we expect to see those come down to much lower levels by the end of the year. It is not outside the realms the possibility that small year-on-year increases will happen in later months of the year.

"If there are falls at all towards the end of the year, it would be expected that they would be only up to about 0.5 per cent."

Today's data shows ten consecutive months where the price of property has declined compared to the same month in the previous year. But Leslie Deans, senior partner at Leslie Deans & Co, said: "It is all clearly moving in the right direction and in recent times we have even noticed the return of the closing date. With a number of properties recently there has been a lot of competition. We are now reporting a shortage of flats in the Southside university area and there is a pent-up demand for that type of property.

"Of course, job losses are a concern for any area and Edinburgh is no different. It has a lot of jobs in financial services and banking and undoubtedly a lot more job losses could put a brake on any recovery.

"But that doesn't change my medium to long-term view that demand will continue. We live in the fastest-growing (population] area of the country and, with very few new homes being built, that will increase demand for property that is there."

Ron Smith, the chief executive of the ESPC, said: "There are clear signs of improvement in 2009 but it is worth remembering that this improvement is coming from historically low levels of activity.

"There are many people out there who continue to have very real concerns over job security, and the number of homes selling remains well below that witnessed in recent years, though this is balanced by a reduction in the number of homeowners looking to sell."