The west of Scotland is among the worst affected areas where property values have failed to bounce back since the financial crisis.

However Shetland has become one of three hottest spots in Britain for house price rises according to a new report by PwC.

Inverclyde tops the list of Scottish regional house price drops with a 19 per cent slump over the past 10 years, with East Ayrshire and North Ayrshire equal second with a 17 per cent drop, followed followed by West Dunbartonshire, down 13 per cent.

The Herald:

The areas are among the most affordable areas in the UK where homeowners need only about five times their average salary – compared to up to 17 times in parts of London.

Mortgage lenders usually only allow borrowers to take out home loans which are 4.5 times their salary, meaning some people are faced with never owning a property.

Dr John Boyle, director of research and strategy at Rettie and Co says prices in these areas suffered through a decline in heavy industry and manufacturing which was “further detrimentally affected” by the 2007/2008 financial crisis.

The Herald:

The report by PwC said that while Scotland had moved on from a 0.2 per cent drop in house prices in 2016 to a projected 2.5 per cent increase in 2017, many parts of the Scottish market have yet to recover to pre- financial crisis levels.

“Housing transactions, which tend to be more volatile than prices, are where the uncertainty caused by Brexit has manifested itself most strongly,” the report said.

The PwC report also reveals Britain’s most northerly outpost is level with Cambridge in experiencing the biggest house price rises outside of London, with a 59 per cent hike over the past 10 years.

Shetland was the only Scottish area in the top ten areas in the UK with the greatest price increases – despite a downturn in the oil industry.

The Herald:

Some experts believe Shetland, unlike Aberdeen, has benefited from booming house prices because of the diversity of business on the islands. Fisheries and aquaculture is Shetland’s biggest sector, amounting to more than 20 per cent of economic output. A third of Scottish salmon comes from the islands.

“This has meant that while oil prices have slumped, the economy on the islands still doing well,” said one analyst.

But house prices are still relatively cheap. For the price of a one-bedroom flat in Hackney, London, buyers in Shetland could get a seven-bedroom house overlooking the harbour of the main port, Lerwick, listed for £460,000. The average home in the archipelago, which is nearer to Norway than Britain, was said to be worth £179,000 in February.

And data analysts such as Office of National Statistics and the Land Registry say that low numbers of sales can lead to “volatility”!. In other words, with a population of just over 23,000, just a few sales can dramatically push the average house price up or down.

Faisal Choudhry, director of Scottish research at Savills estate agents said the house price rise in Shetland has come from a low base and has been helped by a restricted market of about 300 sales a year.

“I suspect any growth can be linked to the energy market and just as Aberdeen felt the warm glow of the oil boom, it is currently feeling the chill of a more subdued market,” he said.

“The local Ayrshire market has had a tough time over the last few years. Like some other outlying areas, it took longer to recover following the UK property market slump of the last decade. “House prices fell at the start from 2007 onwards but began to stabilise in 2014. Government incentives like Help to Buy schemes have been particularly effective in areas like Ayrshire. Local house prices are now recovering and properties are selling relatively quickly as long as they are priced realistically.”

Between now and 2020 PwC projects a slowdown in house price rises, with the average Scottish home to cost £160,000 – up from the 2016 figure of £139,000. The average residential property in the UK could be worth approximately £220,000 in 2017, £8,000 higher than in 2016 and could rise to over £300,000 by 2025.