IF you build it, the saying goes, they will come. It's an adage that has held true for decades in the Edinburgh property market, where developers have seen new flats fly off their books long before they have been completed.
Yet in recent weeks, t
here are signs that things are changing. The latest property price figures gave a clear sign that the market is slowing down, to its slowest rate in 13 years.
It is areas with large numbers of two-bedroom flats, including Stockbridge, Marchmont and Bruntsfied, that have been hardest hit by the downturn, according to figures compiled by the Edinburgh Solicitors Property Centre.
It is no coincidence that developers have aggressively targeted that part of the market in recent years, building thousands of smaller flats. That approach is now seeing new-build flats sell more slowly, and sales become sluggish in the "second-hand" market for two-bedroom flats.
The problem at the moment is that first-time buyers can't take advantage of the slowdown in price rises because, thanks to the recent financial crunch, they can't get the credit they need.
That is starting to cause difficulties for the developers who have so many new flats in the pipeline.
The reduced demand is a direct result of the dreaded credit crunch. While in the past, lenders would happily throw their money at buyers, now they are being that bit more fussy.
As of last week, you can no longer get a 100 per cent mortgage from any of the big lenders. So if you're buying a property at the average Edinburgh price of £210,123, you now need at least five per cent – or £10,506 – up front. Add to that stamp duty tax and fees and you need to stump up a decent sum at the outset to buy your own home.
For many buyers, that is a new idea, and something that is not instantly possible. Instead, they are looking to rent and that increased demand is, ironically, seeing the cost of renting a home in the Capital soar. Letting agent DJ Alexander said the average cost of renting a two-bedroom flat has shot up from £675 in December up to £800 now. And it believes that could go up by another 30 per cent before the end of the year. So, there is good news for the housing market in general, if not for first-time buyers. The growing demand for rented flats shows there are still large numbers of people looking for properties in the Capital. The thing is that more and more of them can't afford to buy.
Should that trend continue then the booming profits to be had in buy-to-let are sure to keep the Edinburgh property market buoyant.
THE golden lining for would-be buyers is that the current strict lending rules on who can get a mortgage are not likely to remain forever. In terms of housing, Edinburgh is still booming. Latest projections show the Lothians will need at least 70,000 new homes over the coming decades.
City-based Miller Group last week posted its first drop in profits in 13 years, which it blamed on the credit crunch.
But finance director John Richards insisted the figures would not result in a knee-jerk reaction. He said that family homes are doing better than flats in Edinburgh, and the property market in Scotland is its strongest in the UK. "There is definitely the capacity to do more here," he said. "Home ownership in Scotland is slightly behind the UK average and I see that gap narrowing as we go forward."
Part of the problem, of course, is that developers need more land to become available. The majority of land used for housing in Edinburgh in recent years has been brownfield. But the supply of such land is limited and there are now calls to open up other pockets – including the greenbelt.
Miller is in talks with Edinburgh City Council and Midlothian Council about the release of a huge expanse of land at Danderhall that would see up to 5000 homes being built.
That level of development is a sure sign that Miller has confidence in the market – and wants to build more.
Despite the current lull, it is hard to find any fears about the long-term health of Edinburgh's property market. The house building programme, seen as an essential part of the city's economic growth, will continue regardless.
The current slowdown in the market is likely to be just that, a temporary applying of the brakes. In the meantime, the housebuilders will continue to go full steam ahead.
