Home affordability for second steppers – those home owners still living in their first home but looking to take their next step up the property ladder - has improved in the past year as a result of higher equity levels, according to the latest Bank of Scotland Homemovers Review.
Housing affordability for Scotland's second steppers – calculated as the average price of a typical second stepper home less their current equity position as a ratio of average earnings – stood at 3.9 times gross annual average earnings in June 2013. This measure of affordability has risen significantly over the past decade – signifying a decline in affordability - from 2.6 in 2003. There has been a modest improvement since June 2012 when the ratio stood at 4.0.
The typical potential second stepper in June 2013 bought their first home in 2008. Such a homeowner is, on average, estimated to have an equity level of £13,985 - equivalent to 10% of the average price for a semi-detached house (£134,667) which is a typical second stepper home. This is an improvement on a year earlier when the typical second stepper equity level (£9,498) was estimated to be 7% of the average price for a semi-detached home.
Despite this improvement, equity levels for second steppers remain low by recent standards. For example, the typical second stepper in 2007 was able to fund close to half (48%) of their next home through equity built up in their first property.
In addition, with the average cost of moving estimated at close to £7,000, it is unlikely that the increase in equity over the past year will be sufficient for many potential second steppers to be able to fund a move to their next home.
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