First-time buyers at lowest level since 1976

THE economic downturn has led to the number of first-time house buyers in Scotland falling to its lowest level for 35 years, new research has revealed.

The extreme difficulty faced by young people struggling to get on the first rung of the property ladder was illustrated by a report that found there were only 17,121 first-time buyers this year.

The number of first-time buyers in 2011 dropped 4 per cent from the 17,900 recorded in Scotland in 2010 and is now well under half of the recent peak of 39,100 in 2006.

According to the Bank of Scotland’s First-Time Buyer Review, the number of people who succeeded in buying their first property has fallen to its lowest annual total since 1976.

Yesterday, politicians described the downward trend as “alarming” and there were demands for the UK and Scottish governments to take more action to stimulate the fragile property market.

The decline was observed despite the bank’s research showing that Scotland has some of the most affordable properties in the UK.

The report identified the size of deposit that first-timers now had to raise to make a purchase as one of the key factors preventing people from buying their first home.

At a time when Scottish unemployment has risen dramatically, wages are falling behind inflation and it is harder to get a mortgage, the average deposit for first-time buyers in the first 11 months of 2011 was £22,396.

Although the average deposit was 9 per cent (£2,120) lower than in 2010 (£24,516), it far outstretched the £12,794 that people were putting down in 2007.

When measured as a proportion of the purchase price, the average deposit has increased from 10 per cent in 2007 to 21 per cent in 2011.

“Conditions for potential first-time buyers remain tough, as highlighted by the low numbers of people buying their first property,” said Nitesh Patel, a housing economist at the Bank of Scotland. “Difficulties raising the necessary deposit and concerns over the economic climate are preventing many from entering the market.”

There was added concern that people were failing to enter the property market even though the survey revealed that seven of the top ten most affordable districts in the UK were in Scotland.

South Ayrshire was the most affordable local authority area in the UK, with the average house price working out at just over two and a half times (2.65) gross average earnings in the area.

The average price paid for a house in Scotland this year was £105,624, compared with £240,768 in Greater London.

When the bank’s economists calculated the top ten most affordable areas in the UK by comparing house prices with earnings, they found that Northumberland followed South Ayrshire into second place.

Renfrewshire beat Pendle in north-west England into third place. North Ayrshire was fifth, just above County Durham. Thereafter the list was dominated by Scottish council areas, with Inverclyde, Stirling, Fife and West Dunbartonshire making up the rest of the top ten.

Labour’s housing and infrastructure spokesman, Richard Baker, said: “These are alarming figures and confirm what Labour has said for some time now – that the trends in the Scottish economy are all pointing in the wrong direction.

“For the last year, the Scottish economy has grown even more slowly than the rest of the UK, compounded by the decision of John Swinney to cut capital investment at twice the rate of the rest of the UK, which contributed to a vicious economic cycle.

“The Scottish Government has been telling us for months that its economic and housing policy is working, but this looks more unconvincing by the day.

“We need much more co- ordinated effort to address Scotland’s housing needs, so there is adequate provision of social and private housing stock.”

He added: “Labour has put forward a plan called ‘First Foot’ to get young Scots on to the housing ladder, whereby the government underwrites the cost of borrowing. Our scheme has been lauded by the industry and I am offering to work constructively with the SNP government to implement it.”

But Alex Salmond’s Scottish National Party laid the blame at the door of the UK government.

The SNP’s Westminster Treasury spokesman Stewart Hosie MP said: “It is clear that mortgage availability problems and increased deposit levels remain a key issue for first-time buyers, and the priority has to be getting the housing market moving. It is clear that the UK government’s actions are hindering rather than helping.”

Mr Hosie referred to Chancellor George Osborne’s decision not to extend his stamp duty holiday for first-time buyers beyond March next year.

The Bank of Scotland report remarked that 99 per cent of first-time buyers in Scotland were exempt from paying stamp duty in 2011. The UK government’s decision to temporarily raise the stamp duty threshold from £125,000 to £250,000 accounted for many young Scots being exempt from the tax.

The report predicted that times would get even tougher next year, with 23 per cent more first-time buyers being required to pay stamp duty when the holiday ends in March 2012.

The research, based on the bank’s housing statistics database, found the average age of a first-time buyer in Scotland was 29, in line with the UK average.

The youngest first-time buyers were in the north of England, Yorkshire, Humber and Wales, where the average was 28.

Buyers in London had to wait longer for their first house, with the average age of first purchase being 32.

Overall, Scotland was the sixth most affordable place for first-time house-buyers when the UK was broken down into 12 regions. The north-east of England was the most affordable and London the least.