Young families stranded as they try to climb property ladder

THE affordability of a new home for “second steppers” – those living in their first house but looking to take their next move up the property ladder – has improved over the past year, but is still well below that of a decade ago, a report has revealed.

Nitesh Patel: 'It is unlikely many will be able to fund their next home'. Picture: PA

Bank of Scotland’s Homemovers Review found that while things have become slightly easier for homemovers over the past year, properties north of the Border are still more expensive in comparison to the average salary than many other parts of the UK.

The report also showed that the average property price paid to move home in Scotland has risen by more than anywhere else in the UK over the past decade – an increase of 54 per cent.

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Higher equity levels in property pushed the affordability of a second-step home slightly lower in June compared to last year, the figures revealed, at 3.9 times gross annual earnings, compared to four times 12 months ago. However, this is still well above the 2.6 times salary seen in 2003 – and higher than anywhere in the UK but London and the south of England.

“Housing affordability for the typical second-stepper in Scotland has marginally improved in the past year,” said Nitesh Patel, housing economist at Bank of Scotland.

“Nonetheless, there are many potential second-steppers who are still in their first home which they bought in the run-up to, and at the peak in house prices in 2008. Many of these homeowners may still be unable to move due to having either very low or negative equity.”

Typically, those who would be looking to move to their second home would have been first-time buyers in 2008 and would have, on average, an estimated £13,985 of equity in their property – about 10 per cent of the average cost of a semi-detached house, the report said.

However, in 2007, those moving on from their first home typically had equity worth almost half the value of their new property.

In 2013, the average homemover deposit in Scotland was £52,246 – almost a 50 per cent rise from 2003. Across the UK, those moving up the housing ladder put down an average deposit of £70,540.

Mr Patel said: “The lack of equity for many homeowners in their existing home largely explains why the number of Scottish homemovers in the first six months of 2013 rose by only 
2 per cent compared with a year earlier; while the number of first-time buyers grew by 22 per cent over the period.”

The figures showed those moving home in Scotland paid an average of £170,534 for their new property, compared to just £110,952 in 2003.

“In addition, with the average cost of moving estimated at close to £7,000, it is unlikely that the increase in equity over the past year will be sufficient for many potential second-steppers to be able to fund a move,” added the report.