Housing less affordable in rural areas of Scotland

Saturday 13th September 2008

The average house price across rural Scotland is 13% more expensive than the average house price in urban areas, according to the annual Bank of Scotland Rural Housing Review. House prices in rural areas currently average £186,446, £21,930 higher than the average urban house price of £164,517. However, the average house price in rural Scotland is 21% lower than the average house price across rural Great Britain (£235,324).

The most expensive rural local authority (LA) in Scotland is Aberdeenshire with an average house price of £213,559. At the other end of the scale the least expensive rural LA in Scotland is the Western Isles where the average house price is £137,319, 36% lower than the average house price in Aberdeenshire.

• The average level of house prices in rural areas is £186,446, 13% higher than the average urban house price of £164,517.[1]
• The average property price in rural areas is 5.9 times average annual earnings compared with a ratio of 5.2 in urban areas
• Western Isles recorded the sharpest rise in house prices across rural areas since 2003 (172%), followed by Moray (147%) and East Ayrshire (132%)
• Aberdeenshire is the most expensive rural LA in Scotland (£213,559), followed by East Lothian (£202,924) and Perth and Kinross (£183,600)
• East Lothian is the least affordable rural local authority in Scotland with an average house (£202,924) price that is 6.5 times local average annual earnings,
• East Ayrshire is the most affordable rural area with an average house price: earnings ratio of 4.6 followed by Perth and Kinross (5.5)
• First time buyers account for just 20% of all rural buyers compared with 31% in urban areas
• 10% of the housing stock is social housing in rural areas compared with 15% in urban areas

Suren Thiru, economist at Bank of Scotland, said: "Housing in rural areas is less affordable than in urban areas due to a combination of higher average prices and lower average earnings. The difficulties for home buyers in rural locations are particularly acute among first time buyers and are exacerbated by relatively low levels of social housing provision."

Housing Affordability

House prices in rural areas are nearly six times average annual earnings (Table 1)

As a result of higher house prices and lower average earnings, rural areas are less affordable than in urban areas. The average property price in rural areas is 5.9 times average annual earnings compared with a ratio of 5.2 in urban areas.

East Lothian is the least affordable rural LA in Scotland (Table 1)

East Lothian is the least affordable local authority in Scotland with an average house price (£202,924) that is 6.5 times local annual average earnings (£31,201). The next least affordable rural districts are Aberdeenshire, at 6.0 and the Scottish Borders where the average house price is 5.9 times average times average earnings. In contrast, East Ayrshire is the most affordable rural LA in Scotland with the average house price is 4.6 times local average earnings, followed by Perth and Kinross and Dumfries and Galloway (both 5.5).

First Time Buyers

First time buyers in rural areas, account for 20% of all buyers (Table 3)

There are far fewer first-time buyers (FTBs) in rural than urban areas with FTBs account for just 20% of all buyers in rural local authorities compared with 31% in urban local authorities. Additionally, the average house price paid by an FTB in rural areas across Scotland (£124,758) is 3% higher than the average urban house price for FTB's (£121,194).

Scottish Borders and Argyll and Bute have the smallest proportion of FTB's (Table 3)

Scottish Borders and Argyll and Bute are the rural LA's with the lowest proportion of FTBs (both 20%) followed by Perth and Kinross (21%) and Moray (22%). At the other end of the scale the Western isles (39%) has the highest proportion of FTBs, followed by East Ayrshire and Highland (both 26%).

Social Housing

Social Housing in rural Scotland is significantly lower than in urban areas (Table 4)

10% of the rural housing stock in Scotland is social housing compared with 15% in urban areas. East Ayrshire has the highest levels of social housing (25%), followed by East Lothian (19%). In contrast, Perth and Kinross has the lowest proportion of social housing (12%) of any rural area.

Editors' Notes

House prices used in the research are arithmetic annual average prices of houses – otherwise known as crude averages - on which an offer of mortgages has been granted.  These prices are not standardised and therefore can be affected by changes in the sample from year to year.The data covers the period 2003 to 2008 and has been extracted from the Bank of Scotland House Price database.

This analysis was undertaken using the Office for National Statistics (ONS) Urban Rural classification. This classification defines an area as a Rural Area if it lies in a town or village of less than 10,000, or as an urban area if it lies in a town or city of 10,000 or more. A rural local authority is one where the majority of people live in rural areas.

Data on average earnings is based on ONS figures for April 2007, which have been inflated by national average earnings growth to calculate 2008 estimates at local authority level.

The affordability ratio is calculated as average house price divided by the average annual earnings of full time employed male.

Table 1: Housing Affordability in Rural Local Authorities, 2008

Source: Bank of Scotland House Price Database, ONS, Bank of Scotland estimates                       

*12 Months to June

**Based on ONS average earnings figures for April 2007, which have been inflated by national average earnings growth to calculate 2008 estimates at local authority level.  Earnings figures relate to the average for full-time male employees.Moray excluded due to unavailability of average earnings data.

Table 2: House Price Growth in Rural Local Authorities in the last 5 years  

Source: Bank of Scotland House Price Database                                

 *12 Months to June

Table 3: First Time Buyers (FTBs) in Rural Local Authorities

Source: Bank of Scotland House Price Database                                   

 *12 Months to June

Table 4: Social Housing in Rural Local Authorities

Source: Bank of Scotland House Price Database               

 *12 Months to June

For further information, contact:

Ross Keany    Bank of Scotland Press Office
Tel                   0131 243 7195 / 07876 475815

"This report is prepared from information that we believe is collated with care, however, it is only intended to highlight issues and it is not intended to be comprehensive.   We reserve the right to vary our methodology and to edit or discontinue/withdraw this, or any other report.  Any use of this report for an individual's own or third party commercial purposes is done entirely at the risk of the person making such use and solely the responsibility of the person or persons making such reliance.  © HBOS plc all rights reserved 2008."

[1] Figures refer to the arithmetic average of house prices and have not been standardised.