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Mortgage lenders are warning that record house prices in recent months are putting significant strain on first-time buyers in particular just as the cost of living crisis is starting to bite.
Edinburgh remains the least affordable place to buy a house in Scotland, with the average house price ing the city having gone up 30.9 per cent from £195,101 in 2007 to £255,398 in 2022. That is ahead of the average rise in Scotland over the same period at 27.3 per cent, but below the UK average at 43.9 per cent.
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Graham Blair, mortgages director at Bank of Scotland, said: “With the average Scottish house price hitting an all-time high in recent months, in one sense it’s never been more expensive to move home or take your first step onto the property ladder. That’s undoubtedly put a significant financial strain on buyers, particularly in prime locations such as Edinburgh.
“However, house prices remain well below the UK average, and it’s important to note that we’ve also seen much stronger wage growth over the last 15 years. That’s helped to ensure that from an affordability perspective, Scotland remains one of the best places to buy property for both home movers and first-time buyers, with areas in the west in particular providing great value.
“With Scotland facing the same cost of living pressures as other parts of the UK, we’d expect the rate of house price growth to slow later this year and into next, which should see the gap between average earnings and property prices narrow further.”
The survey did find that in terms of salary expenditure Scotland now had among the cheapest homes in Britain and that homes in Edinburgh are more affordable now than they were 15 years ago, according to the report.
The figures show that in Edinburgh a housebuyer in 2022 needs to spend 6.7 times the average salary for a new home, whereas in 2007 it was 7.1 times the average salary.
But the figure for Scotland – now 5.1 times average salary – is well below the UK average of 7.1.
The bank says the discrepancies are due to a combination of a higher rate of house price inflation in England and a bigger rise in wages north of the border. Salaries in Scotland have risen 38.5 per cent over the last 15 years compared with 29.2 per cent in the UK as a whole.
West Lothian was the only area in Scotland to see affordability worsen compared to 15 years ago, meaning buyers there must now commit 5.1 times their earnings to buy a house, compared to 4.8 in 2007.
Inverclyde was the most affordable place to buy property – in both Scotland and the UK – with a house price to earnings ratio of 3.1.
In contrast, south of the border, anyone looking to buy property in Westminster or the City of London must find 14.5 times their average earnings to be able to do so.