Purchasing your first home was once as simple as raising the cash for a deposit, viewing a clutch of modest properties and landing a winning bid. Now it’s much trickier.
A combination of factors has made the market for first-time buyers one of the most volatile in recent history. Those looking to get on the property ladder in Scotland are experiencing an inadequate supply of houses, forcing owners to stay put rather than place their homes on the market, thus not freeing up smaller dwellings for first-time buyers. There is also a lack of new-build properties, which would ordinarily appeal to those searching for their first home.
House Simple, the property website, revealed recently that Scotland’s two largest cities are feeling the effects most keenly with a 30 per cent drop in new listings recorded in both Glasgow and Edinburgh last month — the biggest fall in the UK.
“A shortage of new properties coming on the market is causing bottlenecks for a range of would-be movers, including first-time buyers,” explains Mark Hordern, of Pacitti Jones, the law firm and estate agency. “Owners of properties that are ideal for first-time buyers are frustrated by the relative lack of choice and are reluctant to sell their existing property without some assurance that they will be able to find a suitable property to move in to. Some in this group are also finding that tighter mortgage lending rules are making it more difficult to move up the property ladder than they would have expected and they are deciding to stay put.”
The latest statistics from the new-build market are not promising. Before the recession in the mid Noughties, figures show that more than 21,000 private sector homes were constructed per year. That number dropped to just above 12,000 last year.
Advertisement
But it’s not all bad news. As with the recovery of the property market after the recession (and the independence referendum), investors are again looking north of the border for places to create new homes. “Developers are coming back to build in Scotland,” Blair Stewart, of Strutt & Parker, confirms. “The new-build scene is getting back on track.”
With a stagnant market and a lack of new housing it may be time to approach home-buying in a different way. These are some of the key issues affecting first-time buyers and expert advice on how to get around them.
First-time buyers are finding it difficult to purchase in Scotland’s cities
There’s no doubt that flats for sale in Edinburgh and Glasgow are becoming rarer. So instead of looking at properties listed online, consider going off-plan. Registering interest with an agent who specialises in acquiring sites prime for development will allow buyers to nab homes before the masses — provided they don’t need to move immediately. “Off-plan sites will appear on an agent’s holding page with a ‘coming soon’ sign and an outline of what will be offered,” says Stewart. “They give buyers the chance to cherry-pick not just their apartment of choice but also individual features, for example being south-facing, or having a balcony. If they get in there early enough they can even pick the colours of flooring and style of cabinets. Murrayfield, in Edinburgh, and the West End of Glasgow are both benefiting from off-plan developments at the moment.”
The added benefit of off-plan is that prospective buyers can approach developers with their property criteria and be contacted when something that fits their requirements comes up, often before it comes to market. What’s more, technology allows homeowners to view each plot, see the view and take a virtual tour of the development-to-be before it has been created. It pays to be proactive in a stagnant market, but buying off-plan also allows buyers to finesse exactly what they want from their new home.
Buy-to-let investors are snapping up all the decent homes
“There’s another factor affecting first-time buyers, especially those who aspire to own a two-bedroom property,” explains Hordern. “These properties are also ideal for buy-to-let landlords and so first-time buyers face competition from landlords, who often have deposits available. Landlords also benefit from interest-only mortgages, which tend to be cheaper than the interest and repayment mortgages that are available to owner occupiers.”
Advertisement
While it might seem pointless to try and compete with investors, there are factors that owner occupiers can seize on which landlords cannot. “Essentially it comes down to price,” says Hordern. “Landlords are buying for commercial reasons and want to get a decent return on their money. They won’t pay over the odds because it will reduce their return on investment. But if you are going to outbid a landlord, you need to have a decent deposit and be ready to move quickly and decisively.” While the years after the recession meant it wasn’t always necessary to have funds available immediately, experts are now advising buyers to have an agreement in principle secured before viewing properties. Competition might be tough, but many Scottish homeowners will still seek to sell to private owners rather than investors if the conditions are right.
New-build estates are dwindling, and those created are not in desirable areas
New-build developments with homes for sale might be scarce, but developers are finding innovative ways of creating communities on land commonly passed over. What’s more, government initiatives in Scotland enable buyers to get on the ladder more easily. “We’re selling homes that will be attractive to first-time buyers in Niddrie, about four miles from the city centre of Edinburgh,” Peter Lyell, of Savills, says. “It’s a mixture of reclaimed land and former local authority housing. People are starting to build in these areas and they’re priced to sell. We’re selling flats that have a face value of £132,000. But with a help-to-buy scheme you can buy them for £105,000.”
Compromise, says Lyell, is also important. “Perhaps these areas aren’t a first choice but to get a two-bedroom flat for a touch over £100,000 in the city centre is difficult. A little further out, it’s not so hard. A good criterion to measure an area’s connectivity is to ask: ‘Where can I buy a loaf of bread or pint of milk?’ Many affordable places, like Niddrie and also north Granton, are also close to supermarkets, bus links and education hubs.”
Both suburbs mentioned by Lyell are just a few miles out of the city centre and offer shoreside living at low costs. Purchasing a first home here can be an effective way to enter the market and be a source of income. “Some couples setting up home together are deciding to hold on to one property and rent it out while they buy their first family home,” concludes Hordern.