Home affordability deteriorates for fourth year in Scotland’s cities

25 February 2017

There has been a further deterioration in home affordability in Scottish cities, according to the latest Bank of Scotland Affordable Cities review. The average Scottish city house price has risen by almost 3% from £181,061 in 2016 to £186,002 in 2017, a faster increase than the 1% for the whole of Scotland. This has resulted in average home affordability in Scotland’s cities worsening in the last 12 months from 5.2 to 5.3 times gross average earnings; the fourth successive annual decline in home affordability.  

Home affordability in Scottish cities is, on average, now at its worst level since 2009 (5.7) and is slightly worse than in Scotland as whole, where the ratio is 5.1. (See table 1)

Stirling is the most affordable city for homebuyers in both Scotland and the UK

Not only is Stirling the most affordable city in Scotland, but it now takes the title of the UK’s most affordable. At £173,848, the average property price in this city is 3.7 times average gross annual earnings. This is much lower than the UK cities average of 6.9. (See table 2)

Edinburgh is once again Scotland’s least affordable city

Edinburgh’s average house price of £236,136 is six times annual gross average earnings, making it Scotland’s least affordable city. Aberdeen (5.7), Perth (5.7), Dundee (5.5) and Inverness (5.5) make up the top five least affordable cities in Scotland. (See table 2)

Londonderry (3.8) in Northern Ireland is the UK’s second most affordable city. Other most affordable Scottish cities to feature in the UK top 20 are Glasgow (9th), Inverness (15th), Dundee (17th) and Perth (20th). (See table 3)

House price growth highest in Perth over the past decade

Perth has recorded the biggest price rise of any Scottish city over the past decade with a gain of 31% between 2007 and 2017, compared to the UK cities average of 21%. Edinburgh, Inverness and Aberdeen had the next highest price rise, with all seeing a gain of 16%.  No Scottish cities feature in the top ten UK cities with highest house price growth this year.  (See table 4) 

Perth house prices recover the strongest following the downturn

Over the past five years, Perth has recorded the highest house price growth with a rise of 27%. Dundee has the second highest increase in average house price (25%), closely followed by Glasgow (23%). (See table 5)

Graham Blair, Mortgage Director at Bank of Scotland said,

“Homebuyers in Scotland’s cities have seen affordability levels worsen for the fourth consecutive year as average city house prices have continued to rise more steeply than average wage growth. However, the average price to earnings ratio in Scotland’s cities is 5.3 - lower than the UK cities average of 6.9.

“It’s little surprise that Edinburgh retains its title as Scotland’s least affordable city, with Aberdeen and Perth close behind. Stirling now takes the top spot as the UK’s most affordable city, as well as Scotland’s.”