‘Vastly more’ affordable housing needed to tackle Scotland’s ‘sobering’ housing crisis

A study into Scotland’s economic outlook in the aftermath of Brexit by accountancy firm PwC, described the picture on housing as “sobering” with the average home in Scotland expected to be worth £156,000 by 2020.

The report said: “The price of an average home in Scotland will fall over the next two years, bucking the UK national trend of rising property prices. But, from 2018 onwards, property prices are projected to recover.”

PwC’s research into housing affordability for generation rent (the 20-39 year old age group who are finding it increasingly difficult to get on the housing ladder) shows that buyers may have to save for as much as 19 years in order to buy their first home (assuming the deposit has to be raised entirely from their own savings without family assistance). This has trebled since 2000 when the same group would have been able to buy after saving for just six years although it is down from previous forecasts of 21 years.

The analysis finds a huge disparity in outcomes between renters and those 20-39 year olds who have already managed to get a foot on the housing ladder. This second group who already managed to buy has been largely insulated from the deterioration in affordability due to capital gains made on their existing homes and continued relatively low mortgage rates.

PwC estimates that someone buying their first home in 2016 could afford to step up to a larger property after only around four years, less than a quarter of the time it could take to save for an initial deposit as a renter.

Adam Turner, government and public sector assistant director, PwC in Scotland, said: “The picture on housing is sobering and timely as we see the end of ‘the right to buy’ scheme at the end of this month. For first time buyers, our latest analysis is bittersweet. Yes, they don’t have to save as long to afford a deposit for their first home as in our previous forecasts – but it’s still going to take them an astonishing 19 years if they don’t have family assistance. For comparison, in 1990 it took two years to save for a deposit for a home, while in 2000 it took six years.

“Those already on the property ladder are in a slightly better place as they have been largely insulated from the deterioration in affordability due to capital gains made on their existing homes. But even these so-called ‘second steppers’ are seeing an increase in the time they need to save before moving on meaning an even tighter supply of homes for first time buyers as people stay put for longer.

“The only long-term solution for Scotland is to build vastly more affordable, quality housing in the places where people want to live. This could eventually lead to a situation where earnings growth again starts to outstrip house price growth, sustainably bringing down affordability for those stuck in generation rent.

“But such a shift is likely to be the work of decades not years. With people in rented accommodation for longer, an important priority in the interim should be to increase the quality, choice and security of rented accommodation so this becomes a more attractive option as it is in countries like Germany or Switzerland where professional institutional investors play a much bigger role.

“Collaboration among developers, social housing providers and government alongside radical and innovative investment measures will be key to solving Scotland – and the UK’s – housing market challenge.”