Home affordability in Scottish cities deteriorates for third consecutive year

26 March 2016

The past year has seen further deterioration in affordability in Scottish cities, driven by rising house prices, according to the Bank of Scotland Affordable Cities Review. The average Scottish city house price has risen by 3%, from £176,009 in 2015 to £181,077 in 2016. This has resulted in average affordability in Scotland’s cities worsening in the last 12 months from 5.25 to 5.36 times gross average annual earnings; the third successive annual decline in affordability. (See table 1)

On average, affordability in Scottish cities is now at its lowest level since 2009 but is still 12% lower than the peak of 6.12 times earnings in 2008 at the height of the last housing market boom. The overall improvement in affordability across Scottish cities as a whole over the past eight years has been driven by a combination of an increase in the gross average annual earnings of £3,179 (+10%) and an average house price decline of £6,293 (-3%).

Edinburgh is Scotland’s least affordable city

Edinburgh’s average house price is 6.12 times the gross average earnings in the city. With an average price of £220,099, houses in Edinburgh are more expensive compared with average earnings than in any other Scottish city.

Inverness (6.03), Aberdeen (5.72), Dundee (5.38) and Perth (5.24) make up the top five least affordable cities in Scotland.  (See table 2)

Stirling is the most affordable city

Stirling is Scotland’s most affordable city and the second most affordable in the UK. The average property price of £165,658 is 4.11 times the gross average annual earnings.

Glasgow is the 2nd most affordable city in Scotland and 10th in the UK, with an average house price of £159,580, which is 5.07 times the gross average annual earnings in the city. (See tables 3 and 4)

House price growth highest in Aberdeen over the past decade and since 2011

Aberdeen has recorded the biggest price rise of any Scottish city over the past decade and with a gain of 58%, is the only Scottish city to appear in the top ten UK cities with highest house price growth (5th place).  This is as a result of rising housing demand due to the strong performance of the oil and gas sector over most of the period.  More recently, Aberdeen has seen a 22% rise since 2011. (See table 5 and 6)

Nicola Noble, mortgages director at Bank of Scotland, said, “The rising house prices over the past three years have resulted in a deterioration in home affordability in Scotland’s cities. Although affordability is at the lowest level since 2009, it is still much lower than the height of the last housing market boom in 2008. Aberdeen has recorded Scotland’s highest house price growth over the past decade and more recently during the economic recovery, due to strong performance in the oil and gas sector.”