Edinburgh house prices down 6.5%

Average prices have dropped for the first time in 37 years

The average house price in Edinburgh has dropped for the first time in 37 years as the capital's property market is hit by the economic slowdown.

The Edinburgh Solicitors Property Centre (ESPC) recorded the 6.5% downturn showing the average property price in the city is now £201,517.

Property sales have also dropped by 60% with just 400 homes sold in August.

Both new statistics were recorded by comparing August's records to the same month the previous year.

The slowdown in sales has led to an increase in the number of properties for sale on the market.

Currently there are around 3,400 homes advertised for sale in Edinburgh compared with just over 2,000 at this time last year.

Ron Smith, chief executive of ESPC, said the rise in the number of properties available, coupled with the constraints in demand caused by tightened lending criteria has left buyers in a stronger position to negotiate lower prices with vendors.

Estate agent Willie Hunter explains one reason behind the downturn

He said: "These figures show that those sellers who wish to secure a sale are now starting to accept the change in market conditions we have witnessed over the last number of months.

"Most sellers are also in a position where they are looking to purchase a new home, so they are able to balance accepting a lower offer on their current property by taking advantage of their stronger negotiating position when they come to buy.

"Typically it takes people much longer to respond to news that the market is cooling than it does for them to react to news of rising house prices, so the fact that we are already seeing evidence of this sort of change in behaviour is good news for the long term health of the market.

"As affordability continues to improve in coming months, and with mortgage rates now returning to levels they were at in August 2007 we should start to see an increase in activity toward the end of the year particularly from first-time buyers who have been priced out of the market by recent rises in house prices."

The average premium paid over the asking price on properties sold at offers over has fallen to just 14.3%, down from over 27% in August 2007.

Statistics also show more than 62% of those selling properties marketed at fixed price accepted an offer below the original asking price, up from less than 28% last year.