Home affordability for city dwellers in Scotland is at its most favourable in nearly a decade, according to the Bank of Scotland Affordable Cities Review.
The average price for a city home in Scotland – £158,706 – stands at 4.96 times gross annual average earnings; the lowest ratio since 2004 (4.79). This is an improvement on the 5.04 times gross annual average earnings a year ago and is significantly below the peak of 6.12 in 2008. City living in Scotland (4.96) also remains more affordable than the UK average (5.51).
The marked improvement in affordability in cities over recent years has been driven by the significant fall in city house prices. Since 2008, the average city house price in Scotland has fallen by 15% (£29,018) from £187,725 in 2008 to £158,706 in 2012. (See Table 1)
Stirling is the most affordable city in Scotland with an average property price of £150,950, which is just over four times (4.04) gross average annual earnings. Stirling is also the fifth most affordable city in the UK. The next most affordable Scottish city is Dundee (4.54). Perth – one of the towns to be awarded city status as part of the jubilee celebrations – will become the fourth most affordable city in Scotland (4.90).
Across the UK, Salford in Greater Manchester is the most affordable UK city (3.81). Seven of the eight most affordable UK cities are in Northern Ireland and the north of England. Ely in the east of England is the most affordable city in the south of England (4.60).
The least affordable city in Scotland is Inverness, where the average property price of £165,363 is nearly six times (5.97) gross average annual earnings in the area. The strength of the economy in this part of Scotland has helped to supported prices here over the past decade. Edinburgh (5.74) is the second least affordable city in Scotland.
Truro in Cornwall (9.71) is the least UK affordable city, followed by Oxford (8.80). Inverness (5.97) and York (5.95) are the least affordable cities outside southern England.
Nitesh Patel, housing economist at Bank of Scotland, commented: “The improvement in housing affordability within many of our major urban conurbations has been significant during the past few years and reflects the decline in house prices over the period. Looking forward, the marked improvement in city affordability is likely to help support demand for those able to enter the housing market. Much of this benefit, however, maybe offset by the continuing difficulties many households face in raising a deposit and uncertainty over the outlook for the economy in Scotland.”