Home affordability in Scotland’s cities at worst level since 2009

Home affordability in Scotland’s cities has deteriorated for the fourth year, according to new Bank of Scotland research.

The latest Bank of Scotland Affordable Cities review has found that the average Scottish city house price has risen by almost 3% from £181,061 in 2016 to £186,002 in 2017, a faster increase than the 1% for the whole of Scotland.

This has resulted in average home affordability in Scotland’s cities worsening in the last 12 months from 5.2 to 5.3 times gross average earnings; the fourth successive annual decline in home affordability.

Home affordability in Scottish cities is, on average, now at its worst level since 2009 (5.7) and is slightly worse than in Scotland as whole, where the ratio is 5.1.

Edinburgh is once again Scotland’s least affordable city, while Stirling is the most affordable city for homebuyers in both Scotland and the UK.

Edinburgh’s average house price of £236,136 is six times annual gross average earnings, making it Scotland’s least affordable city. Aberdeen (5.7), Perth (5.7), Dundee (5.5) and Inverness (5.5) make up the top five least affordable cities in Scotland.

Not only is Stirling the most affordable city in Scotland, but it now takes the title of the UK’s most affordable. At £173,848, the average property price in this city is 3.7 times average gross annual earnings. This is much lower than the UK cities average of 6.9.

Londonderry (3.8) in Northern Ireland is the UK’s second most affordable city. Other most affordable Scottish cities to feature in the UK top 20 are Glasgow (9th), Inverness (15th), Dundee (17th) and Perth (20th).

Perth has recorded the biggest price rise of any Scottish city over the past decade with a gain of 31% between 2007 and 2017, compared to the UK cities average of 21%. Edinburgh, Inverness and Aberdeen had the next highest price rise, with all seeing a gain of 16%. No Scottish cities feature in the top ten UK cities with highest house price growth this year.

Over the past five years, Perth has recorded the highest house price growth with a rise of 27%. Dundee has the second highest increase in average house price (25%), closely followed by Glasgow (23%).

Graham Blair, mortgage director at Bank of Scotland, said: “Homebuyers in Scotland’s cities have seen affordability levels worsen for the fourth consecutive year as average city house prices have continued to rise more steeply than average wage growth. However, the average price to earnings ratio in Scotland’s cities is 5.3 - lower than the UK cities average of 6.9.

“It’s little surprise that Edinburgh retains its title as Scotland’s least affordable city, with Aberdeen and Perth close behind. Stirling now takes the top spot as the UK’s most affordable city, as well as Scotland’s.”

Industry body Homes for Scotland described the decrease in home affordability in Scotland’s cities as a “worrying trend”.

Chief executive Nicola Barclay said: “This further deterioration in home affordability, highlighted by an increase of 3% on the average city house price, is a worrying trend for both those looking to purchase in Scotland’s vibrant cities as well as for the industry as a whole.

“Rents and house prices are continuing to rise as demand outstrips supply, meaning many individuals and families are facing growing pressures and aspirations are being stifled. With housing production having fallen by 40% since 2007, but the number of households rising, it is vital that we see the bold action and investment needed to provide enough homes of the right types in the right locations to meet the diverse housing needs of our growing population.”