Assetz® News - Cut-price Scotland still closing gap

Cut-price Scotland still closing gap

19th October 2007 |

When it comes to the UK housing market, it is increasingly difficult to speak of a national situation. While prices everywhere have risen and scarcity is a commonplace factor, the extent to which this is true has been subject to increasing levels of variation in recent times.

This has been shown by figures from the Halifax today, where the variation between regions tells a picture of a situation that has gone into reverse.

Five years ago, the average house price in the southern half of England, which comprises those regions (including East Anglia) that lie south of the Severn-Wash line, was 115 per cent greater than those in the north. However, prices in the north then grew faster than the south until, at the end of the first quarter of 2006, the gap was just 56 per cent. But the subsequent surge in southern prices, led by London, has seen the difference widen again to 68 per cent. In contrast, the last quarter saw a 2.1 per cent fall in the north (north-east and Cumbria) region.

But while the situation between two parts of England has changed, Scotland keeps closing the gap on regions to the south. Halifax's partner, Bank of Scotland, showed in its quarterly house price index that over the past five years Scotland's prices have risen so much they have even closed the gap of Greater London, with the capital's prices now being 2.3 times as high, compared with three times the expense in the third quarter of 2002. Over the last 12 months, Scotland's house prices, while still cheaper overall, have risen by 14.2 per cent, compared with a national average of 10.7 per cent.

Each region's house price situation will have an impact on buy-to-let, though of course house prices must be considered in the context of the local income, with the implications for salary multiples that brings. What is clear for investors in Scotland, however, is that there is not always a pattern where areas with high price rises are in close proximity.

For example, the highest price rise over the last year, one of 35 per cent, came in Inverurie, an Aberdeenshire town within easy commuting distance of Aberdeen, which saw the third highest rise at 25 per cent. But the second highest rise was in Greenock at 32 per cent, a town within commuting distance of Glasgow on the banks of the Clyde estuary. Yet so many other West of Scotland towns within commuting distance of Glasgow, such as Airdrie, Hamilton and Dumbarton have seen price rises in single figures.

The difference here is that Aberdeen is fairly isolated, with relatively few homes and towns nearby, compared to the more populous central belt. It also has a stronger, oil rich economy. Another difference is that Glasgow has a very extensive rail system with connections to most local towns, whereas in the Aberdeen area such services are sparse, the only two stations in the city being in the centre and at the airport. Inverurie's location on a rare rail commuter route automatically favours it over other local towns.

Buy-to-let in Scotland also brings considerations such as lifestyle appeal (for example, the attraction of being close to some of Britain's most celebrated countryside), as well other local peculiarities.

Yet for all the local variations, perhaps the overall picture is the most notable feature for Scottish buy-to-let. Research by Landlord mortgages this month showed that rental yields have risen by 0.45 per cent in the last year, whereas they have been static in England. Thus in both buy-to-let as well as the residential sector, the housing market in Scotland continues to look healthy.