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Lloyds TSB Scottish House Price Monitor

25 February 2006

• The Lloyds TSB Scotland House Price Monitor was established in 1992 and is the only such index devoted exclusively to Scotland.
• The quarterly house price index for the average domestic property in Scotland rose by 2.4 per cent in the three months ending January 2006 to give an average mix-adjusted Scottish house price of £132,433.
• On an annual basis Scottish house prices have risen by 16.7 per cent. The annual price change is calculated as the average of the latest four quarters expressed as a percentage of the preceding four quarters.
• Average Scottish house prices have now risen steadily every quarter for five years. Although the underlying annual rate of increase in Scottish house prices calculated over eight quarters is 16.7 per cent, the annual rate of increase calculated from the latest quarter's results alone is 13.6 per cent showing a slowing in price rises.
• The overall Scottish figure does hide a wide degree of variation. Two of Scotland's four major cities are seeing a price decline in the quarter but continue to show annual increases reflecting significant price rises in previous quarters.
• Aberdeen city recorded a slight fall in the quarter of 4.1 per cent but on an underlying annual basis is showing an increase of 23.8 per cent. Dundee city is showing a fall in average prices of 1 per cent in the quarter. This follows a very significant price increase in quarter two of 2005 giving an overall annual increase of 34 per cent.
• A different picture emerges in Glasgow which saw price declines in the two previous quarters but is now showing a large quarterly increase of 9.3 per cent. Overall this gives an annual increase of 19.8 per cent in Glasgow city.
• Edinburgh city is showing the most stable price progression of all Scotland's major cities with a quarterly increase of 1 per cent and an annual increase of 10.8 per cent.
• Areas outside Scotland's major cities continue to show average price increases with much less volatility than the cities. Central, Perth, Tayside & Fife areas show a quarterly gain of 1.7 per cent and an annual underlying increase of 18 per cent.
• The South West area, excluding Glasgow city, shows a quarterly gain of 2.9 per cent and an annual underlying increase of 14.4 per cent.
• The North, excluding Aberdeen city, shows an average price increase of 2.7 per cent in the quarter and an annual gain of 15.7 per cent, while the South East, excluding Edinburgh, shows 2.6 per cent in the quarter and an annual underlying increase of 15.1 per cent.
• Prices of houses in Scotland at the higher end of the market are showing little movement in the quarter. Detached houses rose 0.8 per cent in the quarter and 13.2 per cent annually. Semi-detached houses rose by 1.3 per cent in the quarter and 19.8 per cent annually.
• Terraced houses showed the highest quarterly increase of 9 per cent and an annual increase of 17.8 per cent. The average price of flats rose by 4 per cent in the quarter and by 17.6 per cent annually.
• The Scottish housing market continues to display price increases greater than the rest of the UK. This is partly the result of price catch-up with the rest of the UK and partly due to higher affordability in Scotland. 15The economic slowdown affecting the UK has not been experienced to the same degree in Scotland while prospects for the economy are positive.
• The economic slowdown affecting the UK has not been experienced to the same degree in Scotland while prospects for the economy are positive.
• Consumer confidence remains relatively high while claimant unemployment remains at a 30-year low, with overall growth prospects at between 1.75 per cent and 2 per cent for 2006. The Scottish housing market remains in robust health.
• Affordability in Scotland: at the beginning of 2003, joint income homebuyers in Scotland were spending £12 per £100 post-tax earnings on mortgage interest and capital. By quarter three 2005, this has risen by 75 per cent to £21. Single income homebuyers are spending £46 per £100 post-tax earnings. Scottish homebuyers have 33 per cent better affordability than their counterparts in the UK as a whole.
• Mortgage loan to income ratio: despite the substantial rise in house prices, the ratio of mortgage loan to income supporting the mortgage loan has only moved upwards by 21 per cent in Scotland and by 29 per cent for the UK. Increased equity into house purchase and often more than one income supporting the loan explains the relatively low movement in this key ratio.
• UK and Scottish Gross Decimal Product (GDP): Scotland enjoys a less volatile growth rate than the UK by avoiding the peaks of growth. Currently, growth rates have converged at 1.7 per cent at the end of 2005 but prospects for 2006 show the UK growing at 2.3 per cent compared to Scotland at 1.9 per cent.
• The price index is adjusted for changes in geographic area, property type and season. Information excludes local authority purchases and remortgages.