Boom hits first-time property buyers

While average prices in the capital increased by 13.2 per cent to 168,989, one-bedroom properties easily outstripped this, soaring by 21.84 per cent, according to a new report by the Edinburgh Solicitors Property Centre (ESPC).

In Leith Walk/Easter Road, which is a traditional first-time buyer area, one-bedroom flats jumped in value by 24.2 per cent to an average of 96,219.

In Gorgie/Dalry, the figures are similar. One-bedroom flats leaped from 76,875 to 91,830 in the second quarter of 2004 - an increase of 19.5 per cent.

The statistics are a nightmare for thousands of young buyers who were desperately hoping that the recent increases in interest rates by the Bank of England would herald a slowdown in the market. The Bank has increased the rates four times since November, but so far there has been only a mild softening in the market north of the Border.

Experts now believe that in home-ownership terms we are seeing the beginning of a "lost generation". Figures from the Council of Mortgage Lenders show that first-time buyers now account for 26 per cent of all new mortgages. Five years ago, the figure was 50 per cent.

A recent report by Nationwide, Britain’s biggest building society, described new home-owners as "an endangered species", and said the number of first-time buyers was the lowest for 20 years.

In Scotland, the average age of the new home-owner is now 35, the highest in the UK. A survey by the internet bank Egg predicted that if the trends of the past decade continue, the average age will rise to 40.

A separate report by the Royal Institution of Chartered Surveyors (RICS), published yesterday, also provided little succour for first-time buyers.

It said the rise in the cost of borrowing had "successfully applied the brakes on house-price rises", but this was not yet the case in Scotland. A survey of RICS members in Scotland found that 75 per cent reported prices increased over the past three months, while 25 per cent reported values stabilising. Not one reported a fall.

Ron Smith, the ESPC chief executive, said: "Four recent quarter-point increases in the Bank of England’s base rate do not appear to have dampened local demand. Our property market remains buoyant."

Andrew Rettie, of the agent Strutt & Parker, said: "We have just sold a property in the New Town advertised at offers over 135,000 for 36 per cent over the asking price, while a property outside the city at offers over 625,000 went for 30 per cent over.

"When the number of bids coming in for each property drops from four or five to one or two, that’s indicative of a plateau in the market. So far, we have not seen this."

More broadly, the ESPC quarterly sales analysis shows that the number of properties sold fell by 6 per cent over the past year, although the total value of sales exceeded 700 million, a 6 per cent rise.

City-centre properties outperformed the region as a whole, with the average price rising to 214,861, some 17 per cent up.

Two-bedroom flats in Marchmont/Bruntsfield and Stockbridge/Comely Bank turned in average rises of 20.2 per cent (to 231,885) and 10.8 per cent (to 200,861) respectively.

In East Lothian, values jumped 21.8 per cent, compared with 15.6 per cent in West Lothian. Midlothian increased by just 2.3 per cent, but it has seen major gains for some years, while Kirkcaldy fell by 4.1 per cent. Experts regard both these figures as a "rebalancing".

Further afield, Falkirk saw a 31.8 per cent rise to an average of 94,957, while Stirling soared by 20.8 per cent to 125,947.

Fixed-price refuge from uncertainty of offers over

AT 2:30pm yesterday, Joanna Rae received the news that every first-time buyer hopes for - she had secured her chosen property.

For several months, the 32-year-old, together with her partner, James Cooke, 30, have eyed the housing market with suspicion and trepidation. The boom has meant that even the most basic homes have sold for 30 per cent over the asking price, leaving many buyers wondering which way to turn.

"The ‘offers over’ system is a nightmare," Miss Rae said. "You just don’t know what to bid. People are saying 30 per cent over, but you don’t know if that’s over the true valuation, or what others are bidding."

The couple decided to step back from the system of blind bidding.

"From the outset we favoured a fixed price. It gave us a realistic chance of securing a property. We knew exactly what we had to pay."

"We need a 95 per cent mortgage and under offers over if we bid above the surveyor’s valuation, we would need to find the difference, and we don’t really have any savings for that."

After looking for five months, at properties in Leith, Newhaven, Abbeyhill and Easter Road, they finally spotted a one-bedroom flat in Edinburgh’s Meadowbank at a fixed price of 122,500.

"It was a mixture of excitement and relief to get that call," Miss Rae said.

They had been renting in a three-bedroom flat in Merchiston . "It gave us flexibility and allowed us to live in a flat we could never afford to buy," she said. "But ultimately it’s money going in someone else’s pocket."

Miss Rae added: "We have bought a flat that needs a bit of work. We hope to sell in 18 months and make a bit of money on it."