Housing focus must change as first time buyers stay locked out, new Shelter Scotland figures reveal
10 June 2010
Would-be first time buyers are still locked out of home ownership as mortgages remain out of reach and hefty deposits are still required, new research for Shelter Scotland reveals today (Thursday).
Figures from the housing charity’s annual Shelter Affordability Index (1) show that despite the impact of the recession on house prices, coupled with low interest rates, becoming a homeowner in Scotland is 75 per cent harder than 15 years ago.
The charity is calling for a new approach to housing policy that moves away from the myopic pursuit of homeownership – which risks a return to inflated house prices – and instead towards one that promotes long-term affordability for home owners and tenants alike.
Graeme Brown, Director of Shelter Scotland, housing and homelessness charity, said: “It is a sobering thought that despite the first house price crash in 15 years, the deepest recession since the war and the lowest interest rates in history, it is still harder to buy a house in Scotland than it was before the recession.
“The Scottish Government‘s new discussion paper launched recently (2) posed some pretty fundamental questions about the future direction of housing policy but perhaps the most fundamental one is the housing choices we offer.
“There are tough choices ahead, amid a tight spending environment, but the government’s new discussion document presents a great opportunity for a new vision. Long term affordable housing for home owners and tenants alike must be the priority. A vision where Scotland provides 21st century housing fit for everyone and does not focus on a myopic pursuit of homeownership to the exclusion of all other tenures. If we don’t, there is the risk of a return to inflated house prices and a second economic crisis.”
The 2010 Affordability Index for Scotland stands at 175.6, meaning it is more than 75 per cent harder to access the market than it was when the Index started back in 1994. And Scotland is worse than the UK as a whole, where a first home is 65 per cent harder to afford than in 1994. In fact Scotland has seen the least improvement in affordability of any of the other regions.
However, if you are able to buy, then Scotland is the best place to be a first time buyer in the UK with mortgage costs only 13.7 per cent of the average working household income, compared to the UK-wide figure of 17.3 per cent.
Despite the Bank of England base rate remaining at a historic low of 0.5 per cent in 2009 – less than a tenth of the May 2007 rate – average mortgage rates have fallen by less than a third during the same period, from 6.08 per cent at the end of 2007 to 4.16 per cent at the end of 2009.
The biggest barrier to homeownership remains access to finance. Recent figures from the Council of Mortgage Lenders (CML) show that the average deposit for a first-time buyer stands at 25 per cent, which would mean £31,000 in Scotland. (3)
The 2010 Shelter Affordability Index for Scotland shows:
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The average first time buyer dwelling price in Scotland is now £123,975, compared to £35,821 in 1994. A rise of 246 per cent.
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The average monthly mortgage repayments for first time buyers are now £552.01, compared to £171.08 in 1994.
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Mortgage repayment costs swallow up 13.7 per cent of household incomes, compared with 7.8 in 1994.
Notes to Editors:
- The Affordability Index was devised by Professor Steve Wilcox of York University. The Affordability Index provides a unique measure of how easy or difficult households find it to become homeowners. Unlike traditional measures of housing affordability, the index uses average mortgage costs (and hence takes account of variations in interest rates) and uses specially-commissioned data on the incomes of all working households rather than just those households that succeed in accessing the housing market.
- http://housingdiscussion.scotland.gov.uk
- The Affordability Index shows the average first time buyer property at £123,975 – 25 per cent of which is £31,000.
- Spokespeople are available for interview, telephone the media office on 0844 515 2442. An ISDN line number is available for broadcast interviews.
- For more information about Shelter Scotland visit www.shelter.org.uk
