First-time buyers in Scotland are proving to be less cautious than their English and Welsh counterparts with over half (51%) of all new mortgages going to first-time buyers (https://www.lloydsbankinggroup.com/media/press-releases/2024/bank-of-scotland-2024/scottish-first-time-buyers-make-up-over-half-of-all-home-loans.html). This data from the Royal Bank of Scotland shows that although Scotland saw a 10% year-on-year reduction in the number of first-time purchasers, this decline was smaller than the rest of the United Kingdom. Average house prices for a first-time purchaser in Scotland were £188,670, down only 1% from the previous year, and the average deposit dropped to £39,691, which offers potential first-time purchasers some respite from the rising costs involved in buying a house. Furthermore, compared to the UK average of 34, new buyers in Scotland are often younger, averaging around 31 years old.
Negotiating the minefield of the Scottish house-buying process as a fresh-faced first-time buyer can feel like an uphill struggle! This guide will provide you with the key elements of purchasing your first house in Scotland and some helpful advice on how to avoid any potential problems and issues.
The House Buying Process in Scotland
All Scottish homes are listed at 'fixed house prices', in which offers over the asking price won't be considered, or 'offers over', where a bidding war can happen. Before making an offer on your dream home, you will need to instruct a solicitor to act for you, and they will confirm the tenure, council tax and other legal details. Furthermore, you will need to get a mortgage agreed in principle and appoint a surveyor to value the property.
If your offer is accepted by the seller, both solicitors will issue letters confirming this; these are known as 'concluding missives'. This is the point at which you are legally obliged to go through with the purchase, and a qualified surveyor must be appointed to conduct a home buyer's report to inspect the condition of the property. This survey could reveal any repairs needed to your new home, which could result in getting some money off the asking price. Once the missives are concluded, a formal offer to the seller is issued with an agreed date of entry for receiving the keys. On this date, your solicitor will organise the payment of taxes and release the purchase money to the seller's solicitor and you can finally get those long-awaited house keys!
The entire house-buying process in Scotland takes around 6-10 weeks once an offer is accepted. Speaking of costs, don't forget to allow for significant outlays for legal fees, removals and Land & Buildings Transaction Tax (Scotland's stamp duty equivalent). Budget around 5% on top of the sale price to cover these extras.
Helpful Government Schemes for First-Time Buyers
The Scottish Government's Low-cost Initiative for First-Time Buyers (LIFT) assists households earning below £48,000 in buying a property worth up to £190,000. The scheme provides between 10-40% of the purchase price as an equity loan from the government, interest-free. While first-time buyers will be the full owners of the property purchased through schemes such as LIFT, the government's equity stake is secured by a standard mortgage security on the home. For example, if the Scottish government provides 40% of the purchase price through an equity loan, it will recoup that same 40% percentage when the property is eventually sold unless the buyer increases their ownership stake over time. One key advantage is that there are no ongoing monthly payments required to the government for their equity portion - it's an interest-free loan that is repaid once the home is sold.
There are two main types of LIFT schemes:
OMSE (Open Market Shared Equity) Scheme
The Open Market Shared Equity (OMSE) scheme helps buyers to purchase a home being sold on the Scottish open market provided that the property meets certain maximum house valuation limits that vary depending on the local area. Through the OMSE, buyers will cover between 60-90% of the purchase cost and the Scottish government then retains an equity stake in the home equal to the remaining 10-40% portion of the price. This allows lower-income households to get on the property ladder by splitting the upfront costs with the government's equity share.
NSSE (New Supply Shared Equity) Scheme
The New Supply Shared Equity (NSSE) scheme assists buyers in purchasing a newly built home directly from a local council or housing association. Through NSSE, the buyer will pay between 60-80% of the house valuation upfront and the Scottish government then retains an equity stake equal to the remaining 20-40% of the purchase cost.
Handy Tips for Negotiating the Scottish Property Market
Research different areas thoroughly because home prices can vary hugely and think about your priorities - is it more important to live closer to good schools/transportation/amenities or have that extra bedroom or larger garden?
Get a mortgage agreed in principle and instruct a solicitor as this puts you in a stronger position when making offers. Sellers will take you more seriously versus those trying their luck without financing lined up. Appointing a solicitor ahead of time avoids delays later on.
Budget for additional costs and set aside around 5% of the purchase price to cover outlays such as solicitor's fees, removals, tareshift costs and the Land & Buildings Transaction Tax. These extra expenses can mount up quickly.
Use solicitors experienced in conveyancing to guide you as this complex legal process is not for amateurs. Hire a solicitor who has significant experience in Scottish residential conveyancing to hold your hand through the stress of concluding missives, negotiating repairs, transferring funds and everything in between.
Attend lots of viewings to understand your budget's limits and don't just rely on sketchy property listing pictures! This will give you a realistic sense of what you can afford in your target areas. Scrutinise everything from storage to skirting boards to avoid surprises later.
The first-time buyer's journey in Scotland has some unique aspects, but staying organised, using professionals and managing your expectations can help smooth out the process. Once you get those hard-won keys, you can pour a wee dram and finally start putting your stamp on your first owned abode!
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