Deposit levels affect volumes

If you prefer the latter then you are living in the right country. While housing markets in the south of the UK tend to experienced stomach churning spikes and troughs Scotland’s homes benefit from a more benign rate of change in values. Although we talk about the property crash, values n Scotland are only 10 per cent down on their 2007 peak – that’s more of a dent than a disaster.
The real crash north of the border has been in transaction levels rather than in prices. Housing transactions in Scotland are at half their 2007 levels in a market constrained by limited mortgage availability.
On average only 68 per cent of purchase price was advanced by lenders during the third quarter of 2010 thus implying an average deposit of 32 per cent. This compared with an average advance of 78 per cent in the first quarter of 2007 – a 22 per cent average deposit.
This demand for ever larger deposits has coincided with a dramatic reduction in the proportion of first time buyers in Scotland, falling from 43 per cent of all buyers in the first quarter of 2007 to just 32 per cent in the third quarter of 2010. When first-timers cant access sufficient mortgage borrowings the whole property escalator judders to a halt.
Meanwhile with suitable mortgages proving difficult to find, letting demand is rising steadily in both Glasgow and Edinburgh. Average rents for new lettings of one- and two-bedroom flats in the capital were £597 and £783 per month respectively in the quarter to the end of March – up seven per dcent and 5.56 per cent on the first three months of 2010, according to letting and estate agency, DJ Alexander.
In the west an expected surge in demand from the buy to let sector in Glasgow’s east end has failed to materialise despite the area’s location as home to the athletes’ villages for the 2014 Commonwealth Games.

Neil Thomson , property manager at DJ Alexander in Glasgow, says: “We’ve had no shortage of calls from potential investors making tentative inquiries about buying flats as investments in the east end but very little of this seems to be followed up by actual deeds. The current shortage of mortgage finance is likely to be having some effect but as far as post-games east end goes, it looks as if investors are, for the moment, just dipping their toes in the waster.”
This trend is reflected in current tenant demand, with most of it continuing tobe be focused on the west end, city centre and southside. Based on returns from the most popular locations for privately rented properties, the average monthly rental for a flat in Glasgow is £706 and for houses £829.
David Alexander, DJ Alexander proprietor, says: “Most who have bought into the rented housing market in the last two years are people frustrated by poor returns from savings accounts, which are negative when inflation is taken into account. This type of person sees a private letting investment as a better alternative to the risks associated with the stock market.”

BUSINESS INSIDER, July/August 2011