Action needed to help first-time property buyers after prices jump, says boss of Scots building society

The building society boss says young buyers could be worst hit as house price rises continue to outstrip income (file image). Picture: Getty Images/iStockphoto.

Paul Denton, chief executive of the organisation, commented as he welcomed a “dramatic” rise in house prices, but warned that the impact of Covid-19 could prove a barrier to a generation of buyers getting the keys to their first home.

The organisation, which says it is Scotland’s only independent building society and was established in 1848, noted new house price index data out today showing that property prices in Scotland showed a year-on-year jump of 8.6 per cent in November to £165,703. That was ahead of the UK average of 7.6 per cent, although that marked the highest annual growth rate since June 2016 to reach a record high of £250,000.

Mr Denton said the increase has been driven by pent-up demand caused by lockdown earlier last year, and highlights systemic changes in the market that could affect a generation of young people.

Scottish Building Society boss Paul Denton warns that a generation of young people should not be left behind. Picture: Malcolm Cochrane Photography.

Average house prices rose 152 per cent in the 20 years to 2016, while family income for 25- to 34-year-olds only grew by 22 per cent.

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

The building society boss said: “Remote working, lockdown and the end to the daily commute has seen people re-evaluate their priorities on the type and size of house they and their family need. People are looking for larger homes outside the city, with gardens and home offices.”

But he added that before the outbreak of coronavirus, Scotland was suffering a “significant” lack of housing stock – with 80,000 fewer homes built each year since the last financial crash. “Now the unpredictable consequences of Covid-19 could exacerbate that shortage and increase the generational inequality gap.

“House prices have soared disproportionally relative to income, and many young people struggle to save up for deposits which can be close to their annual salary. They end up relying on the bank of mum or dad or stay at home longer.”

One report out in September found that first-time buyers in Edinburgh needed to pay £50,000 to get on the property ladder.

Mr Denton said: “There is no magic bullet to solving this problem, but it does need to be recognised as an urgent priority for our industry and governments.

“The housing market is worth £18 billion and key to the recovery from a pandemic that has left permanent economic and societal scars. Part of that recovery has to be a real strategic collaboration to ensure that we do not leave a generation of young people behind.”

The latest figures come after Bank of Scotland in December revealed the highest and lowest changes to house prices in Scotland over the previous year.

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