House prices in Scotland fell by the largest amount in 10 years in January, according to the latest Walker Fraser Steele Acadata house price index.

The January 2023 index reveals an average house price of £222,668, which is 0.9% down on December 2022, marking the ‘first real change in direction for house price growth in Scotland since 2012’. It’s the largest fall in a single month since December 2012.

But it’s not all doom and gloom. Despite the month-on-month drop, average house prices remain £9,700, or 4.6%, above the average prices of 12 months ago.

December’s index had recorded a 7% lift in prices annually, to a record high of £225,520.

The index highlighted differences across property types. In January, the price of flats fell the most, with a 2% decrease, followed by terraces, down 1.6% and semi-detached houses which fell 0.6%. There was no change at all in the average price of a detached home, however.

Across the Scottish regions, 23 of the 32 local authorities experienced falling prices in January, when compared to December, including all 11 of the top areas when ranked by price. When weight-adjusted for price changes and transaction volume, four areas accounted for more than half (53%) of the decrease – Fife (-16%), Glasgow (-15%), Edinburgh (-15%) and Falkirk (-7%).

Some of these figures have been attributed to the price changes in property types; Glasgow and Edinburgh having the highest percentage of flats being sold each month, for example.

When looking at the annual statistics though, 26 of the 32 local authority areas were still seeing average prices above the levels recorded a year ago. Six areas accounted for 51% of the overall annual percentage increase, namely Edinburgh (23%), North Lanarkshire (7%), Glasgow (6%), Aberdeenshire (5%), East Renfrewshire (5%) and South Lanarkshire (5%).

While house prices continue to hold up over a 12-month period, chartered surveyors Walker Fraser Steele say the month-on-month fall was ‘perhaps inevitable’ given the recent economic turmoil and allowing for the impact of Christmas.

Walker Fraser Steele regional development director Scott Jack says: “The headline figures this month mark the first real change in direction for house price growth in Scotland since 2012. We are likely seeing a conflation of factors that have resulted in this fall.

“A fall in the average house price was perhaps inevitable given the sudden rise in the cost of mortgage finance and the economic turmoil brought about by the Truss-Kwarteng mini-budget.”

He also says perspective is needed: “We need to remember that in, spite of the fall, the current average house price still remains some £9,700, or 4.6%, above the average price of 12 months earlier.”

Acadata senior housing analyst John Tindale adds: “January and February are typically the weakest months of the year in Scotland’s housing market. When sales levels are low, minor trends can stand out. For example, estate agents have been reporting that the number of sales of properties which have previously been in the rental market is becoming more noticeable, with the government rent cap and future regulation changes deterring investors in this sector.

“Even a small exodus of private investors in buy-to-let properties will have an impact on prices in the winter months.”