The argument over whether it’s better to buy or rent property is not reserved to particular countries; Scottish citizens ask themselves the same question and new surges in their real estate market have more people than ever wondering about the pros and cons. The Bank of Scotland reports that it’s currently 7% cheaper to buy a home than rent one based on the average of cost of buying or renting a three-bedroom house. Many factors play a role, not least of which is the current instability in the Eurozone financial sector, but the most recent result is a decrease in cost to buy homes combined with a significant increase to rent – a pattern that is being seen elsewhere around the world. For more on this continue reading the following article from Property Wire.
The cost of buying a home in Scotland is now over 7% lower than renting, according to latest research by the Bank of Scotland. The average monthly costs associated with buying a three bedroom house stood at £505 in June 2012, some 7.4% or £40 lower than the typical monthly rent of £545 paid on the same property type.
In 2011, the monthly cost associated with home buying was just 0.5% or £3 lower than renting. Over the past year, buying costs have dropped by 6%, while the cost of renting has increased by 1%. The figures mean that Scotland is the fifth most affordable area in the UK for buying relative to renting. In June 2012, buying a house was more affordable than renting in all 12 UK regions.
In contrast, buying was more expensive than renting in all regions in June 2008. Overall, buying is most affordable compared to renting in London with the typical homebuyer paying 14% or £177 a month less than the average renter of £1,108 against £1,284. The disparity between buying and renting costs is smallest in the East Midlands with average monthly buying costs £497 or 2% lower than average monthly rental costs of £505.
In 2008 average home buying costs, at £911, were 62% or £350 more than the average monthly rent paid of £561. The substantial improvement in the affordability of buying relative to renting largely reflects a 45% drop in home buying costs since 2008; caused by a marked fall in both house prices and mortgage rates.
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The average mortgage rate for a new borrower has declined by more than 2% over the last four years, from an average of 5.91% in June 2008 to 3.82% in June 2012. Over the same period, the typical Scottish house price has decreased by almost a fifth or 18%. The typical rent paid has risen by 1.3% since 2010.
Despite the improvement in affordability, the number of buyers in the Scottish housing market has nearly halved over the last four years. There were 46,200 buyers with a mortgage in the 12 months to June 2012, some 46% lower than during the same period in 2008 when it was 86,200.
In the recent Bank of Scotland housing confidence survey nearly two thirds of respondents highlighted concerns about job security as the main barrier to buying a home. Respondents also picked out the challenges in raising a deposit (52%) as a major hurdle to home buying. Home buyers, both first time buyers and home movers, put down an average deposit of £28,354 in June 2012, equivalent to a quarter of the property price.
The average deposit required has risen four fold by £21,717 over the past decade from £6,637 in June 2002. ‘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,’ said Nitesh Patel, housing economist at the Bank of Scotland. ‘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, it is worth noting that once homebuyers are on the housing ladder, their monthly costs are notably lower,’ she added.
This article was republished with permission from Property Wire.