£400 per week rise in value of homes
As property prices explode and locals are priced out of the rural market, how a tatty 1950s bungalow is at the centre of an extraordinary...
HOUSE prices in Scotland hit a record high in October, continuing an 18-month run of increases since the start of the pandemic.
Across the UK, £31,516 has been added to the price of the ‘average’ home since the first full month of lockdown in April last year.
This amounts to a rise of more than £400 per week since the coronavirus crisis began.
Banking giant Halifax suggests this unparalleled performance could begin to tail off in coming months, with the Bank of England signalling a small rise in interest rates to come in December or January. However, Halifax recognises that mortgage rates are historically low and are unlikely to provide a major obstacle to new borrowers.
The ‘average’ house price in Scotland in July 2018 was £160,204 but just over three years later, the figure last month was £190,023.
The Halifax house price index, published yesterday, showed that Scotland outperformed much of the UK in October, with an annual rise of 8.6 per cent, fully 0.5 per cent above the UK-wide figure.
This percentage increase was higher than in parts of England including the East Midlands, North-East, South-East and Greater London. It is thought a ‘re-balancing’ in prices is taking place as buyers relocate from England to Scotland.
Halifax managing director Russell Galley said: ‘UK house prices climbed again in October, as the value of the average property grew by 0.9 per cent, an increase of more than £2,500 during the month. With prices rising for a fourth straight month, the annual rate of inflation now sits at 8.1 per cent, its highest level since June.
‘One of the key drivers of activity in the housing market over the past 18 months has been the race for space, with buyers seeking larger properties, often further from urban centres. This helped push the average price to an all-time high of £270,027.’
Registers of Scotland detected a 16.9 per cent increase in prices in the year to August, putting the cost of the ‘average’ home at £180,832. This was the biggest annual increase since records began.
FROM a glance at the sales brochure, it is hard to see why a property with so little wow factor is generating so much excitement among prospective buyers. A former council house whose drab exterior is matched perfectly to the unkempt garden, its spartan interiors and bare floorboards lacking any feelings of homeliness. Under normal circumstances, this unprepossessing 1950s three-bedroom bungalow might need all the seller’s creative talents to paper over such obvious shortcomings and emphasise its ‘untapped potential’ as a ‘nice little doer-upper’. The reality, though, is rather different. The estate agents looking to offload No 2 Hydro House will scarcely need to lift a finger to ensure a queue of willing purchasers.
Furthermore, they have been instructed to drastically limit the range of acceptable bidders in a way that would seem like madness to ordinary homeowners seeking to maximise their profit margin.
But then, Hydro House is located in the tiny hamlet of Daliburgh on the Hebridean island of South Uist whose residents, in common with the rest of the Western Isles, are facing a crippling shortage of affordable housing.
Hydro House hit the headlines this week because it is being sold with the strict stipulation that the new owner must either be a first-time buyer or an islander, who will use it as their primary residence.
The current owners, the Hebridean Housing Partnership (HHP) – an arm’s length body of Western Isles Council set up to run its social housing stock – came up with the caveat amid rising concern over a dearth of affordable accommodation.
At offers over £100,000, Hydro House’s price tag will still prove a stretch for many in an area where incomes from the three main employers – agriculture, aquaculture and tourism – are traditionally low.
But the move is seen as deeply symbolic at a time when Scotland’s rural and island communities are battling a shortage of workers and an ageing population against a backdrop of rocketing property prices.
THE increasing attraction of remote working during the pandemic, allied to a surge in demand for holiday homes, has seen some houses on the islands command the kind of premium normally reserved for Central Belt commuter hotspots. Some are even marketed as being in ‘walk-in condition as holiday homes’.
In October last year, a renovated two-bedroom cottage overlooking Luskentyre Bay on Harris, with direct access to the famous white sandy beach, was marketed as having ‘second home or holiday let potential’ with an asking price of over £385,000. It eventually sold for £540,588.
Meanwhile, a former croft with no fewer than four rental properties on its land is on sale at Northton on Harris for offers over £1.5million. Compared to that, £100,000 seems a snip.
The Uist experiment is but a drop in the ocean. With an estimated 25,000 second homes in Scotland, previous efforts to discourage the practice – including the removal of a 10 per cent discount in council tax and a 4 per cent supplement on the Land and Buildings Transaction Tax – have had little effect.
In July, the Scottish Government pledged £43million to build affordable homes on the Western Isles amid fears of population decline. But campaigners and housing charities insist radical changes to planning laws are needed to level the playing field. Without urgent action, they fear a form of ‘clearance by stealth’.
‘I’ve read about Cornwall where houses are in complete darkness in winter because they’re second homes,’ said John MacIver, director of operations at HHP.
‘It’s a real challenge across the country. The second homes thing really began to push up property prices in the past five years. There are locals who have second homes and rent them out, it’s not only external.’
HHP looks after 2,300 properties, spread across a 120-mile archipelago from the Butt of Lewis in the north to the islands of Vatersay and Barra in the south. When it no longer needed Hydro House, it was persuaded to sell it off cheaply.
Many more Hydro Houses will be needed to arrest the decline. The population of the Outer Hebrides is set to fall by 16 per cent by 2043 – just over 4,000 people – and the working age demographic is facing the fastest decline in Scotland, with a 25 per cent increase in those aged 75 and over projected by 2028.
The Scottish Government is consulting on a proposed £50,000 ‘island bond’ to encourage families to relocate. Mr MacIver stressed that mainlanders looking to settle on Uist are welcome to bid. ‘It’s not specifically targeted at the indigenous population, it might be something that we do again in future,’ he said. ‘It will be interesting to see how it plays out.
‘We have got an ageing population and a decrease in working population, and significant difficulties in recruitment not only in the care sector but across many sectors in the islands.’
Mr MacIver said HHP aimed to include a legally enforceable safeguard, called a ‘rural housing burden’, in the sale of Hydro House which would effectively prevent the property from being sold on as a private rental or holiday home.
Nationalist Western Isles MSP Alasdair Allan has backed calls for greater protections, saying it is vital that more homes are sold with restrictions on who can buy them ‘if we want the islands to keep having communities instead of holiday villages’.
Lack of affordable homes is often cited as one of the reasons for leaving remote areas, and the squeeze on property shows little sign of easing.
The annual Scotland Staycation Index, prepared by holiday firm Sykes Holiday Cottages, revealed a 92 per cent occupancy rate for its Scottish
holiday lets this summer, with Aberdeenshire and the Highlands and Islands the most popular destinations. The company also noted a 65 per cent increase in inquiries from second homeowners and investors looking to get into holiday letting.
CROFTER and musician Pàdruig Moireasdan, 25, who campaigns for more housing on Uist, said: ‘Over the past six months, I’ve known young interested buyers putting in offers well over the asking price but been beaten by someone who has come in with a cash offer or £20,000 or £30,000 over the asking price. That’s the battle we face.’
That battle is not confined to Scotland. Covid has supercharged the housing market in seaside towns and inland holiday hotspots across the UK, as the shift to home working has led to a surge in demand from city dwellers looking to invest in second properties.
It has forced some popular destinations in England to enact strict planning rules to ensure all newbuild homes are used in perpetuity as primary residences.
Salcombe in Devon, the high-end resort dubbed Chelsea-on-Sea, has become a victim of its own success, with more than 57 per cent of properties now second homes.
It prompted planning authorities at Tory-led South Hams Council to close a legal loophole which allowed new-build properties to slip onto the holiday home market when sold on.
Under new rules, developers are legally bound to register a clause on the title deeds of any new-build, known as a section 106 agreement, insisting any future purchaser must prove they intend to use it as their primary residence.
St Ives in Cornwall led the way in 2016 as the first town to ban selling new-builds as second homes and others have followed suit, including parts of the Yorkshire Dales, where locals are suffering from a similar explosion in property prices.
In one new-build development south of Skipton, Yorkshire, Craven District Council has placed strict rules on new buyers, stating priority will be given to serving and former military personnel or those with a strong local connection.
Holyrood is also considering legislation that would give councils greater autonomy to create planning rules that favour local buyers.
But critics say that the results of the St Ives experiment have been mixed.
A 2019 assessment by the London School of Economics warned that the ban may have backfired, with developers simply choosing to build elsewhere, and locals facing even stiffer competition from those seeking to buy existing properties as second homes.
Study author Professor Christian Hilber said that restricting the number of second homes might have ‘positive effects on amenities and affordability’. But he added: ‘This always comes at the cost of a significant adverse effect on the local economy.
‘Any policy that succeeds in keeping second-home investors away will hurt the local economy, mainly the tourism and construction sectors.’
Another drawback with the St Ives model is that it can only impose restrictions on new-builds – something in short supply in the Highlands and Islands.
Ideally, planners should be encouraged to promote low-cost subsidised housing in places such as the Western Isles, according to Derek Logie of Rural Housing Scotland, a charity set up to tackle housing inequality.
‘As they will have some kind of subsidy in them from the Scottish Government then future restrictions on their sale can be built into those,’ he said. ‘That’s what we do on the mainland. We haven’t done it on the islands because there haven’t been the developers.’
He pointed to a subsidised development recently completed by HHP in West Harris, which provides four affordable rentals to locals at Horgabost: ‘It is in a fabulous location where the amazing beaches are. They were built with public subsidy and were limited to who could buy them because of that. More of that is required.’
But Mr Logie claimed rural areas remain Scotland’s poor relations – 18 per cent of the population live there but receive only 11 per cent of all Government housing spend.
‘What we find is that rural areas haven’t really been able to take advantage of some of the routes into social ownership that you find in towns and cities,’ he said.
‘The Help to Buy scheme and the First Time Buyers Fund, for example, both really depend on developers building houses in the first place. And if there are no developers, then there’s no low-cost housing opportunities.’
Housing Secretary Shona Robison recently defended the Government’s record, saying initiatives including its £3.4billion Affordable Housing Supply Programme had delivered more than 4,800 homes in rural and island communities between 2016-17 and 2019-20. Most were in the social housing sector.
BUT Mr Logie urged ministers to reinstate the Rural Home Ownership Grant, which helped people build their own homes by offering grants of up to £50,000 but was scrapped nine years ago. Its replacement, the Open Market Share Equity (OMSE) scheme was, he believes, a disaster for rural residents.
‘The idea with OMSE was you found a house on the open market and the Government would go in with you to buy it,’ he said. ‘But you were only allowed to buy up to a certain threshold depending on the geographic area you were in.
‘For instance, in Argyll, you could bid up to £125,000 for a three-bedroom house. You could get one of those in Oban, probably, but not on Mull, which is a property hotspot. Fine if you were happy to move to Oban, but not if you needed or wanted to stay on Mull.
‘In other places, the problem with OMSE was there just weren’t enough properties coming on the market. In place like Coll, there are maybe two properties a year for sale, so if you don’t build one, you’re not going to be able to buy one.’
Mr Logie said people are turning down well-paid jobs because there is nowhere to stay, which has even prompted some fed-up firms to seize the initiative. Seafood giant Mowi has recently built staff accommodation on the Isle of Rum for fish farm workers and is now building on Colonsay.
Mr Logie said: ‘The private rental sector has been hollowed out by Airbnb and the great boom in domestic tourism. I have a friend who has just moved to Skye, he’s on over £50,000 a year salary and can’t find anywhere to live. For the last three or four months he has been living in B&Bs. You can’t blame people, because they can make more money from Airbnb and the staycationing market.’
Given the scale of the problem, Scottish ministers must hope their consultation on limiting secondhome ownership will quickly find ways to create affordable homes.
In the meantime, shabby Hydro House is about to be transformed into a new kind of forever home – one forever lived in by locals.