Scottish property values are likely to be more stable and more sustainable than anywhere else in the UK. And here are the graphs that show why.
According to the latest Ability to Buy index from the Royal Bank of Scotland – you can see the full report here – Scotland has the lowest house price to earnings ratio in the UK for first time buyers.
I’ve been sceptical of the value of this measure before (you can see why here), but the bank goes on to say that mortgage payments as a proportion of income for first time buyers is also lower in Scotland than anywhere else in the UK.
And first time buyers in Scotland can save the deposit needed to buy a home more quickly than their equivalents elsewhere. Scottish first time buyers can save a 10% deposit in 29 months according to RBS compared to 37 months for the UK as a whole and 43 months for buyers in the south east of England.
Unlike other affordability studies, the RBS index is not a simple calculation of income, mortgage rates and house prices. It also takes into account inflation, tax, living costs and changes in earnings, calculated for the UK as a whole and for different regions and nations within the UK. The improvement in affordability for in Scotland is partly due to better than average income growth.
Now, this report only looks at affordability for first time buyers, but the principle applies, I believe, to the market as a whole and for one very good reason. In general, house prices in Scotland are lower than they are elsewhere.
According to a report by the Bank of Scotland/Lloyds TSB, Scotland saw the smallest increase in house prices in the UK over the past 40 years. Since 1971, prices inLondon have risen by 189% and prices across the UK rose by 144%. In contrast, prices in Scotland are up 91%. While average UK prices rose in real terms (i.e. after inflation is taken in to account) by 2.7%, the equivalent figure for Scotland is 1.6%.
That may be nothing to crow about. House prices are closely linked to economic performance. But it does mean that property is more affordable in Scotland than elsewhere which, in turn, should mean that prices are more stable.