Property prices across Scotland surged by 8.6% in the last year, ahead of the UK average of 7.6% and despite an ongoing pandemic.

Edinburgh saw a more modest rise of 3.1%, making the average value of a property in the Capital £287,239, compared with £278,482 in 2019 and a national average of £165,703.

House values in East Lothian rose by 4.9% to £252,964, in West Lothian by 6.9% to £173,455 and in Midlothian by 7.4% to £196,489, according to figures published by the Land Registry and the Office for National Statistics (ONS).

Across the country, terraced properties showed the largest increase, rising by 10% to £139,874. The largest increase was in East Ayrshire at 15.6% to £110,073. The only decrease was recorded in Aberdeen City, where the average price fell by 3.4% to £140,629.

That there has been such a healthy boost to the value of properties is good news for homeowners, particularly those looking to sell.

The rise was due, at least in part, to pent-up demand caused by the lockdown earlier in the year, however some observers are concerned that it contributed to an ongoing shift in the market that is making it more difficult for young people to gain a foothold.

Two factors are particularly significant. Before Covid, Scotland was already facing a lack of housing stock, particularly in Edinburgh and Glasgow, with 80,000 fewer homes built each year across the country since the financial crash in 2008.

The growth of homeworking has seen many people, particularly those with families, reassess their priorities and many are prepared to pay a premium to secure larger homes with gardens, exacerbating the already large inter-generational, inequality gap.

Another challenge is a tightening of the purse strings by mortgage lenders meaning it has rarely, if ever, been more difficult for younger buyers to afford a deposit on properties that are now more widely out-of-step with earnings than they were a generation ago.

The Scottish Government has made some efforts to help with a raising of the Land and Buildings Transaction Tax (LBTT) threshold until the Spring of this year, and the launch of the First Home Fund (FHF), that provides loans for first time buyers to help them pay for a deposit.

However, some have criticised such schemes as little more than tinkering. The LBTT holiday is estimated to save buyers on average only around £2100, while the £150million FHF was boosted by another £50million last summer, the scheme for 2020 closed for new applications on October 2, due to the high level of demand.

 

A recent study by the Nationwide estimated that the cost of a deposit for first time buyers now equates to a year’s salary for the average young person which, in Scotland, would take them around six years to save.

 

However, there is hope, according to Which? magazine, whose recent consumer analysis of the mortgage market included some upbeat predictions for 2021.

 

Experts anticipate that rates on 90% mortgages could soon begin to drop.  It was striking how quickly choice became restricted last year. In March, first-time buyers with a 10% deposit had 779 mortgages to choose from and, by October, that figure had fallen to just 51.

 

There is now some light at the end of the tunnel – at the end of last year several lenders relaunched 90% mortgages and, while rates remain higher than before the pandemic, greater competition is expected to bring cheaper deals this year.


Meanwhile, the Bank of England is reviewing its mortgage rules, which cap the number of mortgages available at 4.5 times applicants’ income or higher. Relaxing these restrictions could boost the borrowing power of first-time buyers.

And while it may be cold comfort to people who can’t afford a costly deposit, those who are able to secure a mortgage will benefit from continuing low rates, particularly borrowers with some equity in current homes.

 

Those re-mortgaging at 60% loan to value (LTV), can get a two-year fixed rate deal at over 1%, or 1.2% at 75% LTV.

 

For more information about properties available in your area call Purdie & Co Solicitors and Estate Agent on 0131 346 7240, email property@purdiesolicitors.co.uk or visit www.purdiesolicitors.co.uk