How Scottish houses are becoming less and less affordable

House price growth in Scotland is increasingly outstripping people’s ability to pay, BBC analysis shows.

The gap between what people earn and the average cost of housing has widened substantially over the past 20 years.

In 2003/04, the average house price cost 3.8 times the typical wage – the difference between income and house price is £55,000.

But by last year it had risen to 5.2 times the average annual wage – a difference of £150,000.

Housing experts have warned that a significant number of people will never be able to get on the housing ladder, with long-term implications.

Figures recently released by the Registers of Scotland (RoS) show that the median property cost in Scotland (whole market – all property types) was £185,000 in 2023/24, while the average price of a new build home was £300,000.

That means the average property is just over five times the average gross annual salary of £35,518 – and new builds were eight times the annual salary of most people.

Compared to 2003/04, houses were 3.8 times higher than average earnings and new builds seven times higher.

East Lothian had the highest property prices last year with an average house price of £283,227, followed by East Renfrewshire at £280,000 and Edinburgh at £270,000.

In relation to new build homes, East Renfrewshire had the highest average price at £435,000, followed by East Dunbartonshire at £409,125 and Midlothian at £399,995.

Kieran Davidson told BBC Scotland News that buying a one-bedroom flat in East Lothian felt “out of reach” because of rising prices and the competitive nature of the market.

The 34-year-old pet health consultant said: “I knew what I wanted, but then what you want and what the reality is are very different.

“After looking at four or five properties, I realized what would be available for my budget. Properties go for much more than advertised.

“I didn’t want to commit to something I wasn’t happy with and I wasn’t in a rush to buy because it’s a big decision.

“You have to be realistic. I was a little excited about some of the features, but I realized it wasn’t going to happen.”

Kieran described the experience as “stressful” and viewed around 30 properties and submitted five offers before finally securing his home.

Professor Ken Gibb, director and principal investigator of the UK’s Collaborative Center for Housing Evidence, said rising house prices were not good for the long term.

“The general picture is that house price-to-income ratios are widening, both because of rising house prices and because of stagnant or poor yields,” he said.

“When you combine this with tight mortgage regulation and higher interest rates, we see a long-term trend against home ownership, with high deposits and prices continuing to rise when incomes are not.”

The RoS data also shows that the volume of mortgage-financed sales made up 64% of the market, but has been falling since its peak in 2007/08, when it accounted for 84.5% of sales.

“All of this is a reminder that rising real house prices are not actually good for society in the long term or for the economy,” Professor Gibb said.

“It means that over time the balance between outright owners and mortgage holders will shift towards the former and in the long term there will be significant cohorts of people who would have become owners before who now never will.

“This has beneficial implications for pensioners (who will still be paying rent) and means they have to increase their pensions in light of the fact they will have no nest egg to live on.”

A Scottish Government spokesman said: “We support home ownership and help people on low to middle incomes from a range of groups through our open market shared equity scheme to buy a home.

“Since April 2007 we have delivered over 131,000 affordable homes.

“This includes affordable homes for social rent, affordable rents and affordable home ownership.

“We remain focused on delivering 110,000 affordable homes by 2032 and investing almost £600 million in the Affordable Housing Supply Program in 2024-25.”