Location is one of the most important considerations for home buyers when it comes to deciding on a new house, and many purchasers are prepared to pay a premium to secure their ideal setting.

Rural Premium

The Scottish countryside is one such location that carries a property premium, with recent Bank of Scotland research revealing that house buyers are paying £17,231, or 11%, more on average than urban dwellers to secure a rural location.

However, the research also found that while prices are higher in rural areas, the price gap is reducing as urban house prices increase at a faster rate. Between 2011 and 2016, the average price of a home in the Scottish countryside rose by 14% compared with an average increase of 22% in urban areas.

As a result, the rural-urban premium has narrowed over the last five years from 18% (or £24,228) in 2011 to £17,231 (11%) in 2016.

Geographical Variations

As with urban house prices, average rural property prices can vary widely depending on where in Scotland they are located.

East Ayrshire is apparently the most affordable rural local area district (LAD) in Scotland, with an average house price of £127,646, which is 4.3 times the local average annual earnings of £29,979. This is closely followed by Dumfries and Galloway, where the average house price of £133,462 is 4.6 times the average earnings of £28,960. The Western Isles is Scotland’s third most affordable rural area, with average house prices of £129,547, 4.7 times the annual earnings of £27,557.

East Lothian and Perth and Kinross are the least affordable rural LADs in Scotland, where average house prices are 6.2 times and 5.7 times average earnings respectively.

The higher than average prices can make it difficult for first-time buyers to get on the rural property ladder. In the countryside, first-time buyers account for only 45% of all mortgage financed purchases, compared to 51% of purchases in urban areas. First-time buyers in East Lothian face the biggest obstacles, accounting for only 37% of buyers.

"Our How Scotland Lives research has shown that countryside living can have a positive impact on peoples’ happiness, so it’s to be expected that people will be attracted to living in the countryside and this does come with a premium,” explained Graham Blair, Mortgage Director at Bank of Scotland.

“Affordability is often a key driver in any decision to purchase a home, with some rural regions more affordable than certain urban locations there are options for anyone considering an escape to the country,” he added.

Catchment Area Premiums

Previous research by Bank of Scotland highlighted a second location-related factor that can add a substantial premium to property prices.

The research found that Scottish parents are prepared to pay an additional £80,000 on average to be able to live in the catchment area of the highest performing state schools.

The average house price in Scotland is currently around £169,552, but a house in the catchment area of one of Scotland’s Top 20 performing state schools can achieve an average price of £249,635 – an increase of 68%, or £80,000.

“Being in the catchment for a good school is one of the major considerations parents take into account when purchasing a property and it is clear those choosing to buy near one of Scotland’s Top 20 state schools are paying a significant premium,” said Graham Blair.

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