First Time Buyers in Scotland – Location Comes at a Price
In my opinion, aside from the ongoing ‘cost of living crisis’ one theme that continues to arise in discussions about the Scottish economy is property prices. As I observed in my recent blog, the latest statistics from the UK House Price Index Scotland – March 2023 (published on 24 May) highlight that the average price of a home in Scotland in March 2023 was £184,877 – a 3% increase over the past 12 months.
Further statistical analysis reveals that while detached properties have increased by 4.9% over the past 12 months to an average value of £339,717 – flats and maisonettes have recorded a more modest 1.7% annual percentage change. These have increased to an average price of £124,952 over the 12 months to March 2023.
First-Time Buyers in Scotland
The news that flats and maisonettes are rising slower in price than other forms of property may be welcome if you are a first-time buyer keen to gain a foothold on Scotland’s property ladder. Media reports, including the Daily Record, also recently noted that the Scottish Government points to the fact that in general terms Scotland is a more affordable country than England to buy a first home. Apparently, the average first-time buyer will spend almost £100,000 less north of the border for a property. There’s also first-time buyer relief for Land and Buildings Transaction Tax, potentially saving some first-time buyers almost £600 in the costs associated with purchasing a property.
However, few would disagree that there remain significant challenges for a first-time buyer to secure the keys to their first property. A report by Bank of Scotland (January 2023) that analysed 2022 data, noted that first-time buyers and compared to 2021 faced an increase to over £41,000 in the average deposit required for a property. In addition to highlighting that the average age of a first-time buyer is over 30, the same source revealed that first-time buyers made up 50% of all home loans. In my opinion, the most telling statistic is that the report states ‘average property values for first-time buyers are now around 5.0 times the average Scottish salary (£37,940.)’
Obviously, house prices and therefore statistical analysis will vary but these figures are a stark reminder of the challenges facing first-time buyers.
It would seem the old adage – ‘location, location, location’ – comes at a price for the hard-pressed first-time buyer. After all, if you work in the likes of the City of Edinburgh and wish to avoid a commute, there’s the reality that Scotland’s capital continues to record some of the highest average property prices. The latest statistics suggest an average property price of £324,000 and one-and-two-bedroom flats in the City of Edinburgh continue to be in demand. While areas of the city, including parts of Leith and the likes of Joppa, Newhaven, Gorgie and Dalry may offer relative affordability, many properties still command over the Home Report valuation with stiff competition for the keys to the door despite the continual rise in mortgage interest rates.
Beyond Edinburgh, the latest UK House Price Index Scotland – March 2023 notes that average annual property prices in East Lothian, Perth & Kinross and West Lothian have all increased by +5% in the 12 months to March 2023. Notably, according to the Bank of Scotland report, East Lothian tops the list of the least affordable area in Scotland, with first-time buyers facing average house prices of 4.5 times the Scottish average salary.
Flexibility for affordability
Consequently, it’s clear that if you do have a degree of flexibility in where you are willing to live it may pay you dividends to widen your geographical search. For example, the UK House Price Index Scotland – March 2023 states that the cheapest local authority area to purchase a property is Inverclyde, where the average annual cost (to March 2023) was £110,000. Within this area are the towns of Greenock, Port Glasgow and Gourock. All are well served by good transport links to Greater Glasgow and depending on the location, you may also be close to the waters of the Firth of Clyde with beautiful views towards Isle of Arran, Cumbrae and Bute.
As a point of note, in the Bank of Scotland report the local authority areas of West Dunbartonshire, Inverclyde, North Ayrshire, East Ayrshire and South Ayrshire all rank most favourably (in Scotland) when considered in terms of affordability based on ‘house price to average earnings ratio.’
Of course, commutes to the likes of the City of Glasgow bring their own costs and you may seek options closer to the city. In and around Greater Glasgow, the areas of Easterhouse, Possilpark and Castlemilk may prove easier to get a foothold on the property ladder. Looking eastwards, in and around Dundee, you may find the DD1 postcode is one of the cheaper areas to buy.
Mortgage lending and offers over valuation
I have noted some criticism of the fact mortgage lenders won’t consider the additional cash pot often required by buyers when trying to purchase a property. For example, within the Home Report, a valuation – and note that ‘valuation’ is not a legal requirement within a Home Report – may suggest a property value of £100,000. This is the figure that will influence how much the bank will lend. However, if the seller is looking for 10% over valuation (£110,000) it means that the first-time buyer faces the unenviable situation of finding both the deposit for the property and whatever sum is being asked as ‘offers over valuation.’ Little wonder many first-time buyers feel stuck in the rental market while trying to save considerable amounts of money in order to be competitive when trying to secure their first home.
In my opinion, it would be helpful if banks and other lenders also considered the market value when looking at mortgage agreements for first-time buyers. In practice, this would mean that if an area is seeing similar properties in a certain area routinely sell for (say) 10% more than the valuation – the bank would lend that additional money to support you as a first-time buyer.
I hope this blog has given you food for thought, including locations in Scotland that may suit a very tight budget. As a professional and independent RICS recognised chartered surveyor, I take great pride and care at Home Report Company in my preparation of the legally required Home Report documentation. As a first-time buyer, I recommend taking time to study a Home Report – and seeking clarification from the seller of any issues – including structural or energy performance related – that may have been identified.
After all, you may find that a seller is willing to negotiate a little on their price should you – as the potential buyer – be willing to accept the need for some repairs or improvements to the property.
If you have any questions about buying or selling property or would like to ask us for more information give us a call 0131 608 0175 or email email@example.com.
Andrew MacKenzie is a qualified Chartered Surveyor with over 20 years’ experience within the Scottish Property market. He specialises in all types of residential valuations including Home Reports, Private Valuation reports and Development Appraisals.
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