DJ Alexander: Rising prices fail to deter first-time buyers in Scotland

The lettings and estate agency said that the latest data shows a distinctly positive trend. In Q1 2024 (the latest period for which there are official statistics) showed new mortgage lending to FTBs had an annual rate of increase of 9.6% which is considerably higher than for existing homeowners which only rose by 2.2%.

The mean loan-to-value (LTV) ratio on mortgages advanced to first time buyers increased to 80.9% at the start of this year which is almost equalling the pre-pandemic levels (just 0.6% lower) unlike the homeowner market which remains 3.5% lower than before the pandemic.

Scotland had the third lowest level of deposit in the UK last year and, while average prices in Scotland for FTBs have increased by 4.7% over the year to July 2024 from £152,983 to £160,213, this was at a time when average income rose by 6.0%.

David Alexander, chief executive officer of DJ Alexander Scotland, said: “There has been real concern in recent years over affordability issues for first time buyers (FTBs) in Scotland.

“The increasing house prices, coupled with higher interest rates has led to some questioning whether FTBs are as able to afford to buy a home now compared to recent times.

“Of course, there are enormous geographic variations in average house prices, so some places are substantially more affordable than others. The average FTBs house price in Edinburgh only rose by 4.5% but the total at £266,481 was over £100,000 higher than the Scottish average.

“In Dundee the position is completely reversed with a rise of only 0.9% in average house price for FTBs and in Aberdeen a fall of £137 over the year. Glasgow’s average price for FTBs is almost exactly in line with the Scottish average at £165,769.”

Mr Alexander continued: “So, for public sector workers and others with national pay deals the lesson is fairly obvious. First time buyers with these kinds of jobs getting a 6% average pay rise will find owning a home considerably easier in Dundee and Aberdeen than in Glasgow or Edinburgh.

“Therefore, far from being a bleak picture the first-time buyer seems to be returning to the home owning market with a vengeance. This is good news for everyone because the housing market requires the upward pressure of new buyers into the market to push all the other prices higher.

“It is questionable, therefore, whether there needs to be any more financial support for first time buyers given how positively this group seem to be doing despite higher interest rates, continuing economic uncertainty, and with rising utility bills.

“Relative employment certainty, the continued strong desire to be homeowners, and pricing which remains affordable for a substantial number of first-time buyers is keeping the housing market going.”

He concluded: “The most important factor is affordability and again the data indicates that most FTBs are finding their mortgages manageable. At the start of the year the average house price to income ratio had fallen to 2.88 having been at 3.2 in the middle of 2022.

“A ratio below three is generally accepted as reasonably affordable for most homebuyers and is an indication a steadily rising market which most people can maintain. So, further good news for a buoyant housing market in Scotland which remains affordable despite continued price increases and steady demand.

“It is essential that first time buyers remain able to get a foothold in the market to ensure future stability and growth in the housing sector in Scotland.”