House prices soar as buyers are '˜priced out' across the Capital

New analysis shows the typical cost of a two-bedroom flat in Hillside – the area around Leith Walk, Easter Road and London Road – has jumped from £61,732 in 1997 to £269,942 now. And property professionals warned that an increasing number of people are now being priced out of the market.

ESPC, Edinburgh’s biggest property marketing company, has carried out a comparison of the city’s housing market as it was two decades ago and the way it is today.

Back in 1997 it was much easier for first-time buyers to get a foot on the property ladder, with more homes available for sale.

Last year, ESPC said, there was a shortage of housing stock for sale in Edinburgh, resulting in increased competition amongst buyers for the properties available.

The comparison survey found that, whereas properties in the New Town are now generally considered to be out of the reach of first-time buyers, back in 1997 it was the second most popular area in Edinburgh to buy a two-bedroom flat.

The average selling price for a New Town two-bedroom flat was £100,710 in 1997, compared with £319,355 in 2017 – an increase of 217 per cent.

In Leith, 20 years ago the average selling price for two-bedroom flats was £48,984, compared with £169,823 now – up 246.7 per cent.

And back in 1997, Leith was only the sixth most popular place to buy a two-bedroom flat, but now it is the top choice. ESPC puts that down to changes in the area, including pubs being given “hipster” makeovers and student halls of residence coming on the scene.

When it comes to one-bedroom flats, Morningside and The Shore were among the top five areas selling the highest volume of this type of property in 1997.

But nowadays fewer one-bedroom properties are selling in these areas.

A one-bedroom flat in Morningside sold for an average of £51,335 in 1997, but that has now increased 282.9 per cent to £196,540, pricing out many first-time buyers.

The price of a one-bedroom flat in Newington has risen by 232.8 per cent from £47,255 to £157,276.

In today’s “sellers’ market” – where there is more demand than supply – properties in Edinburgh are going for on average 14 per cent above the asking price, according to ESPC.

That means first-time buyers need to be able to get their hands on more cash – above their initial deposit – in order to pay the extra.

And anything over the Home Report valuation has to come from a buyer’s savings rather than being included within the mortgage.

Twenty years ago, mortgages were also far easier to secure. The average mortgage base rate on June 1, 1997, was 7.95 per cent, compared to today’s interest rates ranging from 1.5 up to 4 per cent. But there are many more restrictions in place nowadays to ensure protection for both customers and lenders.

Paul Demarco, from ESPC Mortgages, said: “The other main difference from 20 years ago is that it was possible to get a 100 per cent mortgage, whereas now the maximum is 95 per cent. Northern Rock, for example, used to offer extra funding on top of a 100 per cent mortgage in order to cover home improvements and lawyers’ fees. It was part of the mortgage and a secured loan against the house. There were a lot more mortgage advisers available then and demand for mortgages was high. Overall it was a lot easier for a first-time buyer. But after the financial crash, regulations were put in place and new mortgage rules were introduced.”

David Alexander, managing director of estate agents DJ Alexander, agreed the property market was now much more difficult for those trying to get on the housing ladder.

But he said most of the massive rise in prices probably took place in the first ten years after 1997 rather than in the last decade.

He said: “If you had taken a snapshot of the housing market in 2007 over the ten years up to then, prices would probably have already risen by around 200 per cent by then. And then if you take a snapshot now of the last ten years, since the crash, some properties have not got back to the values they had in 2007.

“It is undoubtedly much tougher for first-time buyers now than it was 20 years ago. Unless you have a substantial deposit it’s very difficult to get on the housing ladder. That’s why we find so many have gone into rented accommodation – because they can’t get the money for a deposit, they have no other option.”

One couple’s effort to get on to the housing ladder in the Capital

ABBY Davidson, 25, and fiance Jamie Chalmers, 31, currently rent a two-bedroom flat in central Edinburgh – but they have had to go outside the Capital to buy their first home.

“We wanted a three-bedroom house,” said Abby. “But we had to downgrade when we realised what we could get for our money.” The couple have been saving for about two-and-a-half years, paying the maximum amount into a Help-to-Buy Isa for the past 18 months.

When they started house-hunting they decided they wanted to stay below the £145,000 threshold for paying the stamp duty replacement Land and Buildings Transaction Tax.

They both work in the city centre but also love running, so wanted to be handy for both town and countryside.

They looked at areas like Bonaly. “But they were going to be too expensive,” said Abby.

They narrowed it down to Midlothian or perhaps East Lothian and have now bought a modern two-bedroom flat in Auchendinny, near Penicuik, for £132,000.

“It took us a long time to save up,” said Abby. “But the process of finding somewhere didn’t take too long because we were quite specific about what we were looking for and we knew the compromises we were willing to make and the ones we weren’t.

“There were a lot of sacrifices while we were saving up – we didn’t go on weekends away and we didn’t really eat out or get takeaways and never bought new clothes – but we kept focused on the goal and knew it would be worth it in the end.”

But she was well aware that it would have been quite a different story if she and Jamie had been house-hunting in an earlier age. “When we’ve had conversations with our parents, they say when they went to buy their first house they just had to show their salary slip and they got a mortgage.”