The burgeoning first time buyer market in Scotland, and particularly in Glasgow, has seen related markets – such as removal services in Glasgow –thrive throughout the past year.
A combination of factors has led to another increase in people able to get their first foot on the property ladder.
In the early 2000s many first time buyers found themselves unable to stump up the prices demanded by a booming property market, with house prices soaring thanks to unchecked credit freely supplied by banks, which were raising capital and the requisite financial insurance via hedge funds and other unsupported privately funded schemes.
The bubble burst of course when defaults forced the banks to start calling in their back-up to find it couldn’t be materialised. This left first time buyers with yet another problem, even in the wake of plummeting house prices.
On the one hand the financial crisis was driving unemployment up and on the other hand credit was becoming scarcer than ever.
This led to a dramatic decline in the first time buyer market in Scotland, and a particularly acute drop-off in Glasgow.
But in the last year, a number of save-to-buy credit schemes and building society mortgages for first time buyers have become available.
This means that young people once again are finding property purchase to be a viable alternative to renting. Rent is once again becoming the more expensive option in cities such as Edinburgh, Glasgow and London, making buying an even more attractive option in what is increasingly seen as a recovering market.
In turn, removal services in Glasgow, storage, financial advice, estate agent services, conveyance and survey provision are all also thriving once again.
The focus of the new building society and house-builder schemes is on first time buyers who might have previously poor credit histories.
The idea is to incentivise saving over a period of six to 12 months, which the lender will then consider as proof of capacity to sustain mortgage repayments. The ‘clean slate’ on offer is proving attractive to young buyers throughout Glasgow.
Some question marks remain, as pointed out by economists and financial markets analysts, given that the larger banks have yet to return to the market as lenders, in light of the expense of raising capital and the difficulties they continue to face in the wake of the economic crisis.
Whereas first time buyers who can scrape together a 10% deposit, are able to take advantage of interest-only mortgage repayments at 3% or 4%, the save-to-buy schemes are more expensive for the first time buyer by around 2%.
On the other hand, they require no more than a 5% deposit, which is especially attractive for those with less than perfect credit scores to convince the big banks or parents prepared to put up sufficient savings as collateral.
Encouraging first time buyers into the property market in Glasgow can only be a good thing for boosting the city’s economy. With rent no longer the definitive cheaper option in comparison to buying, the demand for mortgages will increase, and the property market will welcome this boost from first time buyers.