STATIC or falling wages, combined with rising prices have left the UK economy in the doldrums.
The striking exception is mortgages, which, relative to income, are at their lowest in a decade.
Mortgage payments as a proportion of disposable earnings in Scotland have virtually halved in five years, from 38% in 2007 to 20% today for first-time buyers and those moving home, on account of record low interest rates, small falls in house prices and the larger deposits now being required (leaving a smaller balance to pay off).
In south-east England homeowners have to spend about a third of net income on their mortages. By contrast, Scotland now boasts the most affordable house prices in Britain. The 10 council areas with the most affordable homes (relative to average local incomes) are all in Scotland. Apart from Dundee, they are all in West and Central Scotland. In East Ayrshire on average homeowners need part with just 15% of their income on mortgage payments.
If there has rarely been a better time to buy, why is the housing market so sluggish? There seem to be two factors: a lack of confidence and the large down-payments being demanded by lenders. This is also a problem for second-time buyers wanting to trade-up if they have bought their current property in the past five years, when there has been little growth in prices. Many find themselves stuck in negative equity.
What lessons can be drawn from these figures? With interest rates likely to remain low, once confidence returns to the market, the affordability factor should help the Scottish housing market recover more quickly than elsewhere.
The figures suggest that Scotland could do more to attract immigration from elsewhere in Britain by advertising housing affordability more widely. As well as emphasising the beauty of the countryside and the quality of life, marketing should stress value for money in the housing market. Today a couple in London earning a joint £70,000 struggle to obtain a mortgage and spend much of their earnings on sky-high rents. They could afford to take pay-cuts, yet both obtain a mortgage and still end up better off by moving to certain parts of Scotland, approptiate employment permitting.
These figures also remind us of the growing gap between the have and have-nots in Britain. The "haves" are older homeowners, who have seen huge uplifts in the value of their homes and who pay relatively little, especially if they are on tracker mortgages. Their disposable incomes have improved as interest rates have fallen. By contrast others, often including their own children, cannot afford to get on or move up the housing ladder.
If Scotland is going to benefit from housing affordability, more needs to be done to help more first and second-time buyers, along the lines of the Scottish Government's 95% mortgage scheme for new homes, which will help only 2,000 housebuyers a year. In theory the Westminster Government's new Funding for Lending scheme should help. Will it? The jury is out on that one.
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