NOT FOR BROADCAST OR PUBLICATION BEFORE 00.01HRS 30 OCTOBER 2015 COUNTRYSIDE LIVING MEANS PAYING A PREMIUM

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1 PRESS RELEASE This is the annual Bank of Scotland Rural Housing Review. The Review covers Local Authorities in Scotland which are defined as rural areas, according to ONS classifications. The Review uses Bank of Scotland house price data to calculate rural house price movements. NOT FOR BROADCAST OR PUBLICATION BEFORE 00.01HRS 30 OCTOBER 2015 COUNTRYSIDE LIVING MEANS PAYING A PREMIUM Property prices in the countryside are, on average, 27,047 (17%) higher than in urban areas, according to the latest annual Bank of Scotland Rural Housing Review. This premium has widened from 14% or 17,539 over the last decade. There is a rural premium in all regions with countryside homes typically commanding a significant price premium over urban areas, although there are large variations across Great Britain. In rural areas of West Midlands the average house price of 252,927 is 84,610 or 50% higher than in the region's urban areas ( 168,317) - the largest difference. In the East of England the premium is 16,806 (or 6%) - the smallest difference. (See Table 1) Prices in urban areas have been rising faster over the past five years Despite the higher price for buying in the countryside, the gap with urban prices is narrowing and property prices have risen more slowly in rural areas during the past five years. Between 2010 and 2015, the average price of a home in the Scottish countryside rose by 13% compared with an average increase of 15% in urban areas. In the past year the average price of a home in the countryside has risen by 5%, marginally lower than the 6% increase in urban areas. The most affordable rural local area district (LAD) in Scotland is East Ayrshire with an average house price of 115,394 which is 3.8 times the local average annual earnings of 30,299. Dumfries and Galloway is the second most affordable rural LAD in Scotland, with an average house price of 128,245, 4.5 times the average earnings of 28,691. Argyll and Bute is Scotland s third most affordable. Average house prices there are 153,508, 5.1 times the annual earnings of 30,065. (See table 2) Across Great Britain, East Ayrshire is the second most affordable LAD, with Copeland in West Cumbria being the most affordable, with an average house price of 140, times local average annual earnings of 38,367. Dumfries and Galloway is fourth most affordable, while Argyll and Bute is ranked tenth. (See table 3) The least affordable rural LADs in Scotland are Aberdeenshire (6.4 times) and East Lothian (6.2 times). Fewer first-time buyers in rural areas First-time buyers account for 43% of all mortgage financed purchases in Scottish rural areas. This is lower than in urban areas where first time buyers account for half (50%) of such purchases. Affordability difficulties are the key factors behind the lower level of first-time buyers in rural areas. (See table 4) Getting on the rural property ladder is at its most challenging for first-time buyers in the Scottish Borders where they only account for 38% of buyers in that area. East Lothian, Argyll and Bute, Aberdeenshire and Perth and Kinross also sit below the Scotland average. Dumfries and Galloway and the Western Isles both have the highest number of first-time buyers in Scotland, accounting for over half of buyers (55%). They sit joint sixth in Great Britain along with Carmarthenshire in Wales. Pendle in Lancashire (62%) and Gyynedd in Wales (61%) are the LADs with the highest percentage of first-time buyers in Great Britain. (See table 5). Bank of Scotland plc is registered in Scotland no. SC Registered office: The Mound, Edinburgh EH1 1YZ. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

2 Social Housing in Rural Areas Social housing provision is marginally lower in rural areas of Scotland, with 15% of the housing stock accounted for by social housing compared with 17% in urban areas. In Perth and Kinross social housing accounts for 10% of total housing stock, with Aberdeenshire close behind with 11%. East Ayrshire has the highest level of social housing in rural Britain (22%), followed by Ceredigion, Forest Heath in West Suffolk, Copeland, Allerdale and East Lothian (all 19%). (See tables 6 and 7) Property Size Properties in the rural areas of Scotland are typically a third larger than in towns and cities. The average rural home is 130m 2 in size compared with 100m 2 in urban areas. Nitesh Patel, economist at Bank of Scotland, said, "Living in the countryside is an aspiration for many homeowners, attracted by the prospect of a better quality of life, open space and a cleaner environment. However, this aspiration comes at a cost with average property values almost a fifth higher than in urban areas. "A side-effect of rising property values is that housing affordability has become an increasing concern in many rural areas, particularly in Aberdeenshire and East Lothian where those on average incomes typically find it difficult to enter the market. This, in turn, prices many first-time buyers out of the housing market. Table 1: Rural and Urban Regional Average Prices, 2015 Region Average Price 2015 ( )* % Change ( ) Premium for Rural v Urban Rural Urban Rural Urban % Scotland 185, ,966 13% 15% 27,047 17% East of England 278, ,987 16% 32% 16,806 6% North East 158, ,530 13% 16% 18,066 13% Wales 172, ,237 10% 16% 27,279 19% South West 263, ,786 8% 14% 55,271 27% South East 369, ,614 17% 29% 83,342 29% East Midlands 207, ,062 16% 21% 49,672 31% North West 210, ,723 8% 17% 55,209 35% Yorkshire and The Humber 201, ,562 13% 17% 53,049 36% West Midlands 252, ,317 12% 19% 84,610 50% Great Britain (excluding London) 236, ,481 13% 23% 43,490 22% Source: Bank of Scotland. *12 months to September 2

3 Table 2: Affordability Rural Local Authority Districts, 2015 Local Authority House Prices 2015 ( )* Average earnings 2015** Price to Earnings ratio East Ayrshire 115,394 30, Dumfries and Galloway 128,245 28, Argyll and Bute 153,508 30, Shetland Islands 173,420 33, Western Isles 140,201 26, Scottish Borders 170,250 31, Highland 174,165 30, Perth and Kinross 182,417 31, Moray 160,458 27, East Lothian 202,186 32, Aberdeenshire 242,031 37, Rural Scotland 185,013 31, Urban Scotland 157,966 32, * Bank of Scotland: 12 months to September ** Bank of Scotland estimate Table 3: Ten Most Affordable Rural Local Authority Districts in Great Britain, 2015 Local Authority District Region House Prices 2015 ( )* Average earnings 2015 ( )** Price to Earnings ratio Copeland North West 140,364 38, East Ayrshire Scotland 115,394 30, Yorkshire and The North Lincolnshire Humber 138,866 31, Dumfries and Galloway Scotland 128,245 28, Allerdale North West 145,679 31, Pendle North West 131,542 27, Bassetlaw East Midlands 141,092 29, Carmarthenshire Wales 150,185 29, Staffordshire Moorlands West Midlands 157,549 30, Argyll and Bute Scotland 153,508 30, Rural Great Britain 236,971 33, Urban Great Britain exc London 193,481 32, Source: Bank of Scotland. *12 months to September; ONS-** Bank of Scotland estimate 3

4 Table 4: Rural Local Authority Districts with the lowest % of First Time Buyers (FTBs), 2015 Local Authority District FTB% share of all buyers Scottish Borders 38% East Lothian 39% Argyll and Bute 40% Aberdeenshire 41% Perth and Kinross 41% Shetland Islands 43% Highland 44% Moray 45% East Ayrshire 48% Western Isles 55% Dumfries and Galloway 55% Rural Scotland 43% Urban Scotland 50% * Bank of Scotland: 12 months to September Table 5: Rural Local Authority Districts with the highest % of First-Time Buyers (FTBs) in Great Britain, 2015 Local Authority District Region FTB% share of all buyers* Pendle North West 62% Gwynedd Wales 61% Forest Heath East of England 58% Fenland East of England 57% Denbighshire Wales 56% Dumfries and Galloway Scotland 55% Western Isles Scotland 55% Carmarthenshire Wales 55% East Staffordshire West Midlands 53% Copeland North West 52% Rural Great Britain 42% Urban Great Britain 54% Source: Bank of Scotland House Price Database; * 12 months to September 4

5 Table 6: Rural Local Authority Districts Social Housing, Scotland 2014 Local Authority Social Housing as % of All Housing Stock, 2014 Perth and Kinross 10% Aberdeenshire 11% Highland 12% Moray 13% Shetland Islands 16% East Lothian 19% East Ayrshire 22% Sources: CLG/ Bank of Scotland estimates Table 7: Ten Rural Local Authority Districts with the Most Social Housing, Great Britain 2014 Social Housing as % of All Local Authority District Region Housing Stock, 2014 East Ayrshire Scotland 22% Ceredigion Wales 19% Forest Heath East of England 19% Copeland North West 19% Allerdale North West 19% East Lothian Scotland 19% Northumberland North East 17% North Warwickshire West Midlands 17% St Edmundsbury East of England 17% Wiltshire South West 17% Rural Great Britain 12% Urban Great Britain 19% Sources: CLG/ Bank of Scotland estimates Notes to editors: 1 From ONS and Bank of Scotland estimates for September 2015 for full-time employees. All price figures refer to the arithmetic average of house prices and have not been standardised. These prices are not standardised and therefore can be affected by changes in the sample from year to year. The data covers the period 2010 to 2015 and has been extracted from the Bank of Scotland House Price database. The latest figures cover the 12 months to September This analysis was undertaken using the Office for National Statistics (ONS) Urban Rural classification. This classification defines an area as a Rural Area if it lies in a town or village of less than 10,000, or as an urban area if it lies in a town or city of 10,000 or more. A rural local authority is one where the majority of people live in rural areas. Data on average earnings is based on ONS figures for April 2014, which have been inflated by national average earnings growth to calculate 2015 estimates at local authority level. 5

6 The affordability ratio is calculated as average house prices divided by the average annual earnings of full time employees. Data on social housing for England and Wales is published by the CLG. Scottish data is from the Housing Statistics for Scotland published by the Scottish Government. "This report is prepared from information that we believe is collated with care, however, it is only intended to highlight issues and it is not intended to be comprehensive. We reserve the right to vary our methodology and to edit or discontinue/withdraw this, or any other report. Any use of this report for an individual's own or third party commercial purposes is done entirely at the risk of the person making such use and solely the responsibility of the person or persons making such reliance." For further information, contact: Zoe Redhead, Bank of Scotland Press Office Tel: Web: 6