Scotland most affordable area of UK to set up home
September 4, 2011
HOMEBUYERS in Scotland enjoy the most affordable housing market compared to any where else across the UK, according to figures released today by the Bank of Scotland.
However, a rise in the size of deposits Scots are asked to set aside has stoked fears first-time buyers are still being squeezed out of the property market.
Typical mortgage payments now account for less than one-quarter (22%) of average earnings – down from two-fifths (38%) four years ago, according to the bank’s latest affordability review, leaving buyers throughout the country better off than neighbours in England, Wales and Northern Ireland.
These affordability gains, together with a slowly improving economy, should help to support demand
More than half of the most affordable local authority areas across the UK were found to lie north of the Border with East Ayrshire top of the list both in Scotland and the rest of Britain.
There, homeowners use 17.7% of disposable income on mortgages. The area was followed by North Ayrshire (17.8%) and North Lanarkshire (18%).
Edinburgh remains the least affordable place across the country with almost one-third of disposable earnings devoted to mortgage instalments.
Martin Ellis, housing economist at Bank of Scotland, said: “Lower house prices and reduced mortgage rates have resulted in a substantial improvement in housing affordability since the peak of the housing market in 2007.
“Mortgage payments for a typical new borrower as a proportion of average earnings are now broadly in line with levels last seen in 2003 and are comfortably below the long-term average.
“With the prospect of continuing low rates for some time yet, affordability is likely to remain favourable. These affordability gains, together with a slowly improving economy, should help to support demand in the face of pressures from weak earnings growth, relatively high inflation and higher taxes.”
In a finding likely to worry first-time buyers, though, the average deposit has jumped between 2007 and 2011 from 20% of the purchase price to more than one-quarter (26%) – higher than the UK average.
Michael Luck, managing director of Slater Hogg and Howison, admitted demand for larger payments upfront represented the return of an “issue” for new borrowers unaccustomed to setting money aside in savings.
“It’s only what used to happen back in the 1960s and 70s and early 80s. It’s just moving back to the same premise. People did always buy houses – it’s just unfortunate that we’ve got out of the way of saving to put a deposit down.”
Dr John Boyle, head of research at Edinburgh-based property agency Rettie, said the housing market still faced uncertainty ahead. “Improving affordability certainly provides a boost to the housing market, but there remains a lack of market confidence due to economic uncertainty and relatively high levels of inflation and unemployment,” he said.
Iain Robb, partner in Strutt & Parker’s Glasgow office, said: “These findings do not surprise me, but it would be a mistake to suggest that this ‘affordability’ has brought buyers rushing through the door.
“It is great that housing has become a lot more affordable but that in itself is not enough to stimulate the market when there is so much pressure in other areas.”
Consumer watchdogs last night urged a wider range of alternative options be put in place to help those at the lower end of the income scale secure a place on the property ladder.
Sarah O’Neill, director of policy at Consumer Focus Scotland, said: “Increasing the availability of affordable housing should be a key priority in all parts of Scotland. We also need to see a range of innovative options in place for people to secure a home – whether that is shared equity and rent-to- mortgage scheme’s for first-time buyers or better rights for tenants.”