Scotland more affordable for first time buyers, research suggests

For first timers, Scotland is good

Over three quarters of towns and cities across Scotland are affordable for first time property buyers, according to the latest Bank of Scotland First Time Buyer Review.

Based on Bank of Scotland’s own data, the average price paid by someone looking to get onto the property ladder is affordable for someone on average earnings in 77% of all local authority districts (LADs). This compares with 38% at the peak of the housing market in 2007.

Scotland is the sixth most affordable UK region for first time buyers with the proportion of affordable LADs in Scotland significantly above the UK average of 48%, the research also shows.

Despite the improvement in affordability, the number of first time buyers has weakened further over the past year. Bank of Scotland estimates that there were around 7,500 first time buyers in Scotland in the first half of 2011, a fall of 15% from the same period in 2010 and less than half the number in the first six months of 2007 which was 17,400.

The average price paid by a first time buyers in Scotland has fallen by 1.7%, £1,829, over the past year from £106,900 to £105,070. The average UK first time buyer house price fell by 4.1%.

Over the past decade, first time buyer property prices in Scotland have risen by 108% from £50,519 in 2001 to £105,070. First time buyers in Scotland put down an average deposit of £19,429 in the first half of 2011, equivalent to 18% of the property price. Across the UK, FTBs made an average deposit of £27,219, equivalent to 21% of the property price and 43% higher than the average deposit in Scotland.

In addition, some 99% of first time buyers in Scotland were exempt from paying stamp duty during the first half of 201, higher than the proportion for the UK as a whole at 95%. Nearly a quarter, 22%, of Scottish first time buyers have not paid any stamp duty as a consequence of the temporary increase in the threshold from £125,000 to £250,000.

Those getting onto the property ladder in the South East of England have benefited most from the change in the threshold with 73% of first time buyers in the region exempt from paying stamp duty as a result of the temporary increase.

‘It is encouraging that housing affordability for first time buyers in general has improved significantly over recent years as a consequence of the marked falls in both house prices and interest rates since 2007,’ said Suren Thiru, housing economist at Bank of Scotland.

‘Despite the marked improvement in affordability, conditions in the housing market for those looking to take their first step onto the property ladder remain difficult. The significant challenges in raising a deposit and widespread pessimism about the chances of being accepted for a mortgage are stopping many prospective first time buyers from entering the market,’ Thiru added.

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