The average house price paid by a first-time buyer in November 2011 was affordable for someone on average earnings – based on the ratio of the average house price to earnings being below the long-term average of 4.0 – in 77% of all local authority districts in Scotland. This compares with just 31% at the peak of the housing market in 2007.
Nonetheless the number of first-time buyers continues to decline. Notwithstanding better affordability, Bank of Scotland estimated that there were around 17,000 first-time buyers in Scotland in 2011. This is the lowest annual total since 1976, 4% lower than in 2010 and less than half the recent peak of 39,100 in 2006.
Much of the fall in the number of first-time buyers in recent years can be explained by the need to put down a bigger deposit. The average first-time buyer deposit in the first eleven months of 2011 was £22,396. Whilst this was 9% (£2,120) lower than in 2010 (£24,516), it compares with £12,794 in 2007. As a proportion of the purchase price, the average deposit has increased from 10% in 2007 to 21% in 2011.
Scotland is the sixth most affordable UK region for first-time buyers. The proportion of affordable Scottish LADs is the sixth highest among the twelve UK regions and is also close to double the UK average (44%).
The North East of England is the only UK region where all LADs are affordable for first-time buyers. In contrast, London is the only region with no affordable areas.
An estimated 99% of first-time buyers in Scotland were exempt from paying stamp duty in 2011 according to the data. Nearly a quarter of first-time buyers did not pay any stamp duty as a consequence of the temporary increase in the starting threshold for first-time buyers from £125,000 to £250,000.
On this basis, 23% more first-time buyers – and 24% in total – will be required to pay stamp duty once this concession for those trying to getting onto the property ladder for the first time ends in March 2012.
Nitesh Patel, housing economist at Bank of Scotland, commented: “Housing affordability for those looking to get onto the property ladder for the first time has improved significantly over recent years, largely as a consequence of the decline in house prices since 2007.
“As a result, more than three-quarters of towns and cities across Scotland are affordable for first-time buyers compared with less than one-third at the peak of the housing market in 2007. Seven of the ten most affordable areas for first-time buyers across the UK are in Scotland.
“Nevertheless, conditions for potential first-time buyers remain tough, as highlighted by the low numbers of people buying their first property. Difficulties raising the necessary deposit and concerns over the economic climate are preventing many from entering the market.”
Repost: Mortgage Introducer