House prices in the west of Scotland dipped slightly in the last three months following a strong rally over the summer according to the latest GSPC Property Market Report.

Average selling prices across the region fell by 2.0 per cent in the third quarter of the year and by a more modest 0.8 per cent in Glasgow.

Despite this, house prices are now five per cent above the low they hit at the start of this year, although they remain 10 per cent below their peak in late 2007.

Annual house price inflation, the difference between prices now and the same time last year, is now -1.4 per cent.

The average selling price of a home in Scotland's most populous region is now £136,000, roughly £2,000 lower than in the autumn of 2009. In Glasgow, it is £145,000, also £2,000 lower than a year ago.

The analysis for the report is conducted by Professor Gwilym Pryce of the Urban Studies Department at Glasgow University and includes more transactions in the west of Scotland than any other index (with the exception of the Registers of Scotland).

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Selling times, a key measure of market conditions, lengthened over the last three months. Average selling times have risen from 72 days in mid-summer to 91 days by the end of September. Nevertheless, selling times remain much shorter than the 127 days reported at the start of this year.

According to Michael Samuel, Chairman of GSPC, the market has been characterised by a rise in new instructions that has not been matched by an increase in sales. He said: "Sellers who had postponed moving in the immediate aftermath of the credit crunch took the opportunity in the summer to put their homes on the market. The number of new instructions to sell is 35 per cent up on last year.

"Most of these sellers also wanted to buy, but the bottleneck of limited mortgage availability combined with an understandable desire to sell before you buy meant that sales did not match supply. It also seems increasingly likely that many working in the public sector are being more cautious about buying given the prospect of imminent spending cuts.

"It is very unlikely, however, that we are on the cusp of a more sustained fall in prices. Immediate past experience has shown that sellers tend to respond to falling prices by withdrawing their property from the market or postponing a decision to market their home for sale. The sharp reduction in new instructions in 2009 was one of the key factors behind the recovery in the market this year. It is quite possible that a similar trend will be seen again this winter, with any price falls being relatively modest."

According to Professor Pryce: "House prices in Glasgow remain considerably higher than at their lowest point during the recession and growth has returned to the wider economy (albeit tentatively). However, housing market recovery is likely to remain slow and unsteady for the foreseeable future, partly because of cautious lending in the mortgage market and partly because it will take a while for anticipated public sector cuts to work through the system."

(GK)