The cost of buying a home in Scotland is 6% lower than renting, according to new research from the Bank of Scotland. The average monthly costs associated with buying a three bedroom house stood at £524 in December 2012, some £34 or 6% lower than the typical monthly rent of £558 paid on the same property type. Over the course of a year this is equivalent to a saving of £408.
The Halifax says that the gap between the costs of buying and renting has widened by £19 per month over the past year. At the end of 2011, the monthly costs associated with home buying were £15 or 3% lower than renting. Over the past year, buying costs have remained the same, while the cost of renting has increased by 3%.
It also shows that buying a house is more affordable than renting in all 12 UK regions. Buying is most affordable compared to renting in London with the typical homebuyer paying 15% or £193 a month less than the average renter at £1,101 against £1,294. In Yorkshire and the Humber there is virtually no difference, with average monthly buying costs just £1 lower than average monthly rental costs at £482 against £483.
‘In the past few years, the sharp decline in home buying costs, combined with an increase in rents, has greatly improved the financial attractiveness of buying a home. This shift has contributed to the increase in the number of house purchases in Scotland in 2012,’ said Nitesh Patel, housing economist at Bank of Scotland.
‘Despite this pick-up, home buying levels are still only half the level at the height of the boom. Concerns over job security and raising a deposit are the main obstacles to people buying their own home. However, it is worth noting that once home buyers are on the first rung of the ladder, their monthly costs are notably lower,’ he added.
The research also shows how buying has been cheaper than renting in Scotland since 2011. In stark contrast, in 2008 average home buying costs at £851 were 49% or £278 higher than the average monthly rent paid of £573. The substantial improvement in the affordability of buying relative to renting since 2008 is largely due to a 38% decline in home buying costs over the past four years, says the bank. The majority of this fall occurred in 2009 due to a drop in both house prices and mortgage rates.
Quote from PropertyCommunity.com : “People in Scotland are buying their first property at a younger age than in other parts of the UK with an average age of 28, according to new research. Scotland’s youngest house buyers are in Midlothian where they get on the housing ladder at the age of 27.”
The average monthly cost of renting has risen by 4% or £22 over the past two years from £536 in December 2010 to £558 in December 2012. The lower costs of buying compared with renting are likely to have contributed to the 4% increase in the number of house sales in Scotland in 2012. Nonetheless, sales, at 74,000, were still 50% lower than in 2007 when they stood at 148,000.
Concerns over job security and raising a deposit are the key obstacles to buying, the research also found. More than half the respondents to the latest Bank of Scotland housing confidence survey highlighted concerns about job security (66%) and the challenges in raising a deposit (46%) as the main barriers to buying a home.