Homes in Scots cities at their most affordable in ten years

But Budget’s new helptobuy scheme may send prices up,

Homes in scotland’s cities are at their most affordable in almost a decade, according to a report published today amid warnings that the government’s Budget boost for buyers could send house prices back up again.

stirling is the most affordable city in scotland on the basis of earnings house prices, the annual Bank of scotland affordable cities review reveals.

The average house price in stirling is currently 3.81 times the gross annual average wage for the city, compared with a UK average of 5.60. The scottish average is 5.15, the same as a year ago but almost a quarter below the figure of 2008 and the lowest since 2004.

stirling (fourth) and Glasgow (seventh) both feature among the UK’s most affordable cities, a table topped by Londonderry and Lisburn in Northern Ireland. In edinburgh the average house price is 5.59 times gross average annual earnings, but Inverness (5.71) is the least affordable city in scotland, just edging out Perth (5.65).

No scottish city is above the UK aver age in terms of affordability. In oxford, the UK’s least affordable city, the price to earnings ratio has reached 9.66.

The improvement in the affordability of homes in scotland is down to the price falls of recent years. The average price of a city home north of the Border is currently just short of £160,000, according to Bank of scotland, almost £28,000 lower than the 2008 level.

Nitesh Patel, housing economist at Bank of scotland, said: “There has been a significant improvement in housing affordability in many of scotland’s major urban areas over the past five years, largely reflecting the general decline in house prices since 2008.

“Looking forward, the

marked

im provement in city affordability is likely to help support demand for those able to raise the necessary funds to enter the housing market.”

But some commentators caution that an initiative unveiled in this week’s Budget aimed at helping more people on to the housing ladder could backfire by making homes less affordable.

Helptobuy includes a governmentbacked guarantee encouraging lenders to offer more affordable mortgages to borrowers with deposits of between 5 and 20 per cent. The guarantee comes into force in January, while there’s an additional shared equity scheme for borrowers south of the Border that will be available from 1 April.

The guarantee is, like the scottish Government’s existing mI New Home scheme, designed to lower one of the main obstacles preventing firsttime buyers from securing a foothold on the property ladder – the high deposits demanded by lenders.

Yet the scheme is open not only to firsttime buyers but also to existing homeowners. That creates the potential

“If this scheme has any effect it will create demand that will fuel prices” David Alexander of DJ Alexander

for affluent borrowers to take advantage, including those seeking to buy second homes, a possibility the Government has not been able to rule out.

Higher house prices could be the result, some experts believe, delivering the worst possible outcome for firsttime buyers already struggling to save deposits.

David Alexander, managing director of letting agency DJ Alexander, said: “If this scheme has any effect at all I think it will be to create a demand that will fuel house prices, so what firsttime buyers might gain on the roundabout through they will lose on the swings.”