First time buyers in Scotland are on average £860 a year better off with their own home compared to those who rent, according to the latest research.
The average monthly costs, including mortgage payments, associated with buying a typical three bedroom house stood at £522 in December 2016, some £72 lower than the typical monthly rent of £593 paid on the same property type.
The data from the latest Buying Renting Review from the Bank of Scotland shows that this 12% difference is the largest across the country compared to the UK average saving of 7%.
Over the past year the gap between the costs of buying and renting in Scotland has narrowed by £49 per month. At the end of 2015, the monthly cost associated with buying was £121 or 19% lower than renting 19%, in contrast to average UK buying costs which over the last year have risen by 5%.
It is the eighth year of buying being cheaper than renting. The costs associated with a first time buyer purchasing a home in Scotland have been cheaper than renting since 2009, when average buying costs dropped from £756 per month in 2008 to £505.
The average monthly rental payments have increased by only £30 since December 2008, however buying a property has changed from being £184 more expensive each month, to £38 cheaper.
By December 2015 the buying versus renting gap peaked with a 19% difference when average renting costs jumped to £645 from a previous high of £599 in December 2014, while average monthly buying costs dropped to £524 from £536 in December 2014.
For the UK as a whole, first time buyers were still better off buying a property than renting in December 2015, however there was only a 10% difference at £671 buying compared to £744 renting, compared to Scotland’s 19%.
Buying a house is more affordable than renting in all 12 UK regions with the difference being most significant in Scotland at 12% cheaper. Buying is most affordable compared to renting in London with the typical first time buyer paying £161 or 10% a month less than the average renter at £1,420 against £1,581 and an annual saving of £1,927.
The data also shows that the number of first time buyers continues to rise in Scotland, up 4.5% in 2016 compared to 2015, the highest level since the start of the financial crisis in 2007 and after a low in 2009 the number of home buyers getting on to the first rung of the property ladder has grown by 87% to its current level. However, first time buyer numbers still remain 21% below the immediate pre-crisis peak in 2006.
The number of first-time buyers accounted for 49% of all house purchases made with a mortgage in 2016 and this share has grown from 35% at the start of the housing downturn in 2007.
‘This is the eighth year in a row that first time buyers in Scotland are better off buying a property rather than renting. Over this period of time, buying costs haven’t fluctuated much, resulting in the annual saving increasing from £458 to £860. While it’s also the more financially attractive option across the UK to buy rather than rent, it’s more affordable in Scotland. Buying here is 12% cheaper than renting, compared to the UK’s 7% cheaper,’ said Graham Blair, mortgage director at the Bank of Scotland.
But he pointed out that the size of deposit that is often required can represent a substantial hurdle to overcome before realising the potential financial advantages of home ownership.
‘Whilst deposits can raise the upfront cost of buying, it is also an important form of long term savings for homeowners, and coupled with rising prices it contributes towards higher housing wealth. This in itself adds to the financial attractiveness of buying,’ he added.
