Cost of buying a house in Scotland now 7% cheaper than renting
THE cost of buying a home in Scotland is now more than seven per cent cheaper than renting, according to a new report.
Figures show the gap has increased by nearly seven per cent in just the past year and property experts said it was likely to get even bigger.
Economists warned getting on the housing ladder was “difficult” and first-time buyers “still face challenges”.
The Bank of Scotland survey said the average monthly costs associated with buying a three-bedroom house were £505 in June 2012 – £40 or 7.4 per cent lower than the typical monthly rent of £545 for a similar property.
In 2011, the difference was 0.5 per cent or £3, but it has grown as buying costs dropped and rental prices increased. Property experts said that was the first time since the economic collapse in 2008 that buying had become cheaper than renting, thanks to historic low interest rates and increased demand for rental properties because mortgages were harder to get.
Gary Thomson, managing director of Clyde Property, said a possible interest rate cut in the new year could make the gap between renting and buying even larger.
He said: “Undoubtedly, the reason there’s such a difference is the amount of money people are paying on their mortgages. [But] people are finding it difficult to get a mortgage and that forces people to rent.”
He said that “more people are coming in to let than to buy” as a result of those conditions in the market. He added: “Renting has been king for the past four or five years.”
Scotland is the fifth most affordable area in the UK for buying, relative to renting, according to the report. Buying property was more affordable across all regions, a complete reversal from June 2008.
Nitesh Patel, housing economist at Bank of Scotland, said: “It is clearly encouraging that there has been a significant decline in the cost of buying a home for those able to enter the Scottish housing market since 2008.
“The improvement is due to a combination of lower mortgage rates and declining house prices. In contrast, market conditions for renters have deteriorated slightly as rents have risen in the past two years. Despite the improvement in buyer affordability, housing market conditions in Scotland remain difficult.
“Those getting on the housing ladder still face challenges, most notably in getting a deposit, and this challenge, along with the considerable uncertainty regarding the economic outlook, is still contributing to subdued housing demand. However, once homebuyers are on the housing ladder, their monthly costs are notably lower.”
Average home-buying costs, at £911 in 2008, were £350 more than the average monthly rent. Since then, house prices have fallen in Scotland by almost 18 per cent and mortgage rates have fallen by more than two percentage points, said the Bank of Scotland.
The bank added that though affordability has improved, the number of sales is still half what it was in 2008.
There were 46,200 buyers with a mortgage in the last 12 months to June, compared to 86,200 in the same period in 2008.
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