City centre hardest hit as house prices in Capital fall

HOUSE prices in the city centre have dropped more than 11 per cent over the past year, according to the latest figures from ESPC.

It is the steepest drop in house prices in any part of Edinburgh. In the third quarter of 2007, the average city centre property sold for £268,849, but for the same period this year, that figure has dropped to just £239,049.

The Gorgie/Dalry area is second in the league table, with a 9.3 per cent drop in the price of one bedroom flats – the average price is now just £114,549.

Around Leith Walk and Easter Road prices dropped by 7.9 per cent, with Marchmont/Bruntsfield and Stockbridge/Comely Bank experiencing a 6.2 per cent drop.

However, experts said the steep drop in city centre prices did not necessarily mean it was going to be hit by a more profound long-term downturn than the rest of the Capital.

ESPC business analyst David Marshall said: "What you'll tend to see in any market is that if prices are going up in some areas, other areas will perform slightly worse. If that's prolonged, it may be reflective of a trend but at present I'd suggest that it's typical of the market that some areas perform better and some perform poorer. It won't be accurate at this point to say there were particular issues pertaining to the city centre.

"The one trend that we have seen is that the three and four-bedroom houses as yet haven't started declining in price."

His comments were supported by figures which show that four-bedroom detached houses in the suburbs had seen a 20.9 per cent rise in value since this time last year, with the average sale price now standing at £443,637.

The news came as the Bank of England announced a 0.5 per cent cut in interest rates, which many hoped would kick-start the housing market. However, Mr Marshall sounded a note of caution: "Short-term I wouldn't imagine it would have a massive effect. The overarching restriction on demand at present remains the size of the deposits that people need to get a mortgage.

"A cut in interest rates might lead into cheaper financing in the medium term but only when the lending criteria get back towards the middle ground. We have gone from one extreme, where credit was too cheaply available, to the other, where banks have now had to re-balance their books. Hopefully these measures will return us to a more sane middle ground, but it may not show through in the short term."

His sentiments were echoed by Roderick Urquhart, a partner at A & WM Urquhart solicitors in Heriot Row.

He said of the interest rate cut: "It's early days. There's too much other news at the moment to know whether it's going to make much difference.

"We've certainly seen a number of inquiries coming in over the past couple of weeks as regards properties on the market and also individuals thinking about selling, so there's definitely been a slight increase in interest and activity, but it's still quiet."