by STEWART PATERSON © The Herald
Originally published: 25.08.2007

RURAL house prices in Scotland have more than doubled in the past five years and are rising faster than homes in urban areas, according to the latest survey.

Across nine local authorities that are defined as rural, the cost of the average home has increased by 112 per cent since 2002 compared with 107 per cent for urban council areas, the Bank of Scotland Scottish rural housing review has revealed.

It states that the average price of rural houses in Scotland is now GBP 177,000, compared with GBP 157,000 in urban areas.

Aberdeenshire is the most expensive rural area with an average of almost GBP200,000. East Ayrshire has witnessed the highest increase of 151 per cent in the past five years.

The review says that housing problems more commonly associated with cities are also affecting rural communities, and in some cases are more acute.

Higher prices, first-time buyers being priced out of the market, fewer social housing and more second homes adding to the shortage of affordable family accommodation are all highlighted in the review.

In the past year the average price in rural areas has risen by 26 per cent, from just over GBP140,000 to GBP177,000. The average cost of a rural property is now 12 per cent higher than the urban average of GBP157,519.

Martin Ellis, chief economist at Bank of Scotland, said: "Those living in rural areas face particularly tough housing market conditions.

"In general, higher average property prices, together with lower earnings, mean that housing is less affordable than in urban areas.

"Many young people, in particular, are therefore finding it tough to find a foot on the property ladder. This difficult situation is compounded by lower levels of provision of social housing in rural areas."

House prices are far outstripping earnings, with the cost of homes almost six times the average salary, with higher housing costs and lowerwages in rural areas. In towns and cities the figure is just above five times earnings.

East Lothian had the second highest average price and, although it had the lowest fiveyear increase of the nine rural councils, average house prices still increased by 82 per cent.

The proximity to Edinburgh makes it popular with commuters to the capital, but high prices mean it is the least affordable of the nine rural council areas. With an average annual salary of GBP30,283 and an average house price of GBP195,983, a typical home in East Lothian would cost a buyer 6.5 times the average wage.

Western Isles is most affordable with an average price of GBP110,000, equivalent to 4.3 times the average annual earnings of GBP25,459.

Five years ago a house in a rural area would typically cost GBP83,330, but significant annual increases have seen that jump to GBP177,007 this year.

Younger househunters looking for a property are more likely to find an affordable home in urban areas. Only 18 per cent of purchasers in rural Scotland are first-time buyers compared to 31per cent in urban Scotland.

The Western Isles, the area with the most affordable houses, had the most first-time buyers at 40 percent. The Borders had the lowest at 16 per cent.

Second homes have long been cited as a reason for driving prices up and younger families out of rural villages in search of affordable housing.

The Bank of Scotland report found second homes are more likely to be found in rural areas.

Only 0.5 per cent of housing stock in urban locations is a second home compared to 3.5 per cent in rural settings.