However, that does not mean we should automatically ignore statistical reports, such as the latest from Halifax Bank on the differences between the costs of renting and buying a house or flat. While average figures often fail to give a true reflection of real life, they can – especially in relation to the housing market – point towards a trend, which make the results of this survey worth more than just a passing read.
The bank examined the costs of renting versus buying across the UK and then broke the figures down geographically into “regions”, although the compilers appear to be unaware that it has become the accepted norm to refer to “nations and regions” to cope with Scottish, Welsh and Northern Irish sensibilities. Thus, the Halifax compares Scotland with the English region of Yorkshire and Humberside, pointing out that in the former it is 20 per cent dearer to rent than to buy while in the latter the difference is a mere 5 per cent.
This comparison is, however, relevant in one respect, as both Scotland and Yorkshire/Humberside have a mixture of densely-populated urban areas and wide open spaces comprising both arable land and wild moorland, although Scotland dominates in terms of overall size (32,000 sq miles against just under 6,000 sq miles).
Actually, the figures show relatively little difference between Scotland and Yorkshire/Humberside in the average cost of buying (which includes the mortgage, income lost from using savings to fund a deposit, repairs and maintenance, insurance but not – significantly – pre-purchase legal and conveyancing fees). In Scotland the monthly cost of buying is said to be £509 compared to £520 in Yorkshire/Humberside. The big difference is in monthly rental costs, which are £640 in Scotland and £550 in the English location. In terms of the money left in your wallet at the end of the year, Scots are £1,574 a year worse off renting than buying whereas for the Yorkies the figure is only £361.
Despite this, average monthly rents in Scotland are cheaper than in most English regions, not only being below those of London and South-east England but also the South-west (£882), East Anglia (£817), West and East Midlands (£724 and £684, respectively) and North-west (£681).
Also, the monthly cost of buying (mortgage repayments plus other expenses) is cheaper in Scotland than anywhere else except Northern Ireland. This statement may have any recent buyer of a modest two-bedroom flat in one of Edinburgh’s popular inner city districts spluttering over their breakfast cereal but one should never forget that there are wholly different markets beyond the city bypass. As this column, again quoting the Halifax, pointed out several weeks ago, the ten most affordable local authority areas in the UK for first-time buyers were located in Scotland (and none of them, significantly, were in the east of the country).
In statistical terms, it is 20 per cent cheaper to buy than to rent in Scotland, overtaken only by London, where the difference is 21 per cent. Even in affluent South-east England, the difference is 14 per cent in favour of buying.
It seems reasonable to infer from this report that while the cost of renting in Scotland is less than most English regions, it is expensive to rent relative to buying north of the Border. As the cost of renting is determined by the balance of supply and demand this could suggest that Scotland has a lack of rental stock relative to the numbers wishing to rent. This is something for our politicians at Holyrood to think about should they be considering new proposals which might encourage more landlords to withdraw from the market and discourage new entrants, inevitably leading to even less choice and higher rental rates.
- David Alexander, MD of DJ Alexander