Credit crunch leaves glut of unsold homes

THE number of unsold properties on the Scottish housing market has reached unprecedented levels because of the current mortgage squeeze.

Property agents across the country are reporting record levels of homes for sale on their books but a chronic shortage of buyers. Not only are transactions down by up to 50% in some areas but the time being taken to conclude deals has also extended by several weeks.

Solicitors Property Centres in Edinburgh, Tayside and the Highlands – which together have more than 8,000 homes on the market – say sellers are still registering their properties. But buyers are being hampered by the reluctance of banks to grant mortgages in the current economic climate.

They are also shopping around more and for longer periods because of the amount of properties on the market and the lack of competition. Meanwhile sellers are becoming more reluctant to sell because their homes are not attracting the double-digit premiums they were a year ago.

One property website, Rightmove, has coined a new phrase for the phenomenon – "brickormortis." This is the paralysing condition caused by sellers refusing to lower prices as they don't accept their home's saleable value.

There are also signs that buy-to-let investors, who bought flats in a rising market with the hope of making substantial capital gains, are now selling their properties to reinvest their money elsewhere in the financial markets.

In Edinburgh, the Edinburgh Solicitors Property Centre, which covers east-central Scotland, says it has 2,000 more properties up for sale than it did at this time last year.

Business analyst David Marshall said: "We have around 6,200 on the market now compared to 4,100 at the same time last year.

"The number of properties coming on to the market is the same as usual, whereas the number of properties selling is markedly down, by 40% in May and 50% in June.

"Six thousand is the highest figure on record. We have never had such a large selection. It's about 1,000 higher than in 2005, which is when we saw the last peak in property coming on to the market."

Marshall said: "The availability of credit is far more restricted than last year. Also, a lot of buyers are taking a wait-and-see attitude. They are making lower bids in the knowledge there are many other properties on the market they can go for.

"Also premiums are down so sellers are not willing to accept a lower price. It's a stand-off."

Marshall added. "It is taking two to three weeks longer to sell which is a significant amount of time when you are involved in a house purchase."

In the Highlands, a spokesman for the Inverness-based Highlands Solicitors Property Centre said it had 920 properties advertised.

"That is a lot more than usual and the most we have ever had at one time – or at least close to it – because properties are not shifting as quickly as they were. It took a while for the effects (of the credit crunch] to reach us but it is getting to us now. Properties are on the market longer and prices are dropping. There are lot of fixed prices around."

At the Tayside Solicitors Property Centre, there are more than 1,900 properties for sale, twice as many as the same time last year. "Properties are not moving as quickly and a lot of this is down to the lending situation," said manager Helen Wyllie.

"We have a lot of flats on the market at the moment with buy-to-let investors trying to sell so that they can invest in something else."

Wyllie said market conditions were now "completely different". "Nine months ago, buyers were so plentiful that sellers were getting decent premiums above the asking price. There are more fixed prices now, which are a more realistic reflection of values."

The Glasgow Solicitors Property Centre said it currently had 4,180 properties on its books. A spokesman said: "There probably are more than normal but it is not exceptionally high because of the summer holidays."

Glasgow estate agency Clyde Property said it was helping to reduce surplus properties by letting them out. Chairman Bill Cullens said: "Last year we had 1,500 let and managed properties – today we are sitting on over 1,800."

Estate agents confirm there are twice as many properties on the market across most regions than a year ago. David Alves, property manager at Sturrock, Armstrong & Thomson, said: "Sales have slowed right down because mortgages are being rationed.

"There is now an accumulated backlog of homes for sale with some on the market for up to six months, compared to seven or eight weeks last year."

Some sellers were still expecting unrealistic offers based on premiums witnessed during the former boom. "Buyers are absolutely spoiled for choice so the solution is for people to trim their prices a bit."

Property agents and housebuilding companies are calling on the Government to ease conditions for first-time buyers by providing financial assistance and by scrapping or reducing punitive stamp duty.

The latest figures for UK mortgage approvals – 43,000 in May – were the lowest monthly total since 1976.

"The Government should abandon stamp duty, although it probably won't because it is strapped for cash," Alves said.

"The Treasury recently loaned the banks £50m to improve liquidity in the system and then loaned them some more. Unfortunately, none of that appears to have gone into the mortgage market. The banks are hanging on to it."

'Walled paradise' lost after bank repossesses country estate

IT WAS sold as a walled paradise just a few miles south of Scotland's capital. When businessman William Carrington paid £2.25m for Middleton Hall in 2004 he was buying one of the country's best small country estates with a classical A-listed mansion at its heart.

But the estate is now back on the market after being repossessed by Halifax Bank of Scotland.

Middleton Hall, an 18th-century house near Gorebridge, Midlothian, which has 113 acres of grounds surrounded by a 10ft tall protective wall, was purchased by Carrington and his American wife Anne to fit in with their international horse-breeding business.

However, various attempts by the California-based Carringtons to sell their Scottish family home since 2005 – one agent said they disliked the Scottish climate – have failed. At one stage, during the boom in the Scottish property market, it was offered in the US for £13.5m although that had dropped to £4.3m by 2006.

It is now on the market for a relatively modest £2.9m after repossession by the bank last month. A notice attached to the building last week said the Carrington's had been "ejected" from the premises on June 23 by a sheriff officer based in Glasgow.

The house has six bedrooms, a galleried reception hall, an ornate dining room, music room, library and billiard room and a separate stable block. There are also three lodges and a self-contained flat. But the once-immaculate ornamental gardens and Victorian pond are now overgrown after six months of neglect.

The estate has been placed on the open market by Edinburgh property agents Rettie. Selling agent James Whitson said: "We are acting for the bank which repossessed it last month. It has been on the market for the last year but it is now sensibly priced. There is now the opportunity for someone to buy a fantastic house."

The Council for Mortgage Lenders said the repossession rate is going up throughout the UK with 45,000 properties expected to go through forced sales this year after defaults on mortgages.

One property insider said: "It is unusual for a property at this top end of the market to be repossessed but it does happen."