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Rise in number of affordable towns for first-time buyers

The proportion of Scottish towns and cities that are affordable for first-time buyers has risen to its highest level since 2005, according to the latest Bank of Scotland First-Time Buyer Review.

The average house price paid by a first-time buyer (FTB) in June 2012 was affordable for someone on average earnings in 93% of all local authority districts (LADs); the highest proportion for seven years. This is up from 75% a year ago and more than double the proportion of affordable LADs at the peak of the housing market in 2007 when only 43% of LADs were affordable.

The number of FTBs has risen over the past year, albeit from a historically low level, helped by the improvement in affordability. Bank of Scotland estimates that there were approximately 9,000 FTBs in Scotland in the first half of 2012. This is just over a fifth (21%) higher than in the same period in 2011 (7,700), but less than half the number a decade ago (20,900 in 2002). The recent ending of the stamp duty holiday is likely to have boosted the number of first-time buyers in the first six months of 2012 as some buyers brought forward their purchases to meet the March deadline.

The proportion of affordable Scottish LADs (93%) is the third highest among the twelve UK regions and is also close to double the UK average (54%). Across the UK, four of the five most affordable LADs for a FTB are in Scotland. South Ayrshire is the most affordable LAD both in Scotland and the UK with an average property price that is 2.47 gross average annual earnings. Stirling is the second most affordable LAD in Scotland (2.64) while Aberdeenshire is the least affordable Scottish LAD (4.31).

In Scotland 22% more FTBs are required to pay stamp duty as a result of the end of the temporary increase in the stamp duty threshold for FTBs – from £125,000 to £250,000 – at the end of March. In total, 23% of FTBs will now pay stamp duty compared to only 1% during the period of the temporary threshold increase.