For the first time in almost seven years, it’s now cheaper to rent a home than to buy one in most parts of the UK.
On average, renters now pay £71 less per month than first-time buyers who have purchased homes with a 10% deposit. This was a vastly different situation pre-pandemic. In early March 2020, those first-time buyers were typically £102 better off each month than their renter counterparts.
However, in Scotland it remains cheaper to buy than rent, which demonstrates the continued resilience of the Scottish property market. Scotland is now only 1 of 4 places where it is still cheaper to buy than rent. Others include the North East, North West, Yorkshire and Humber. However, Tay Letting West Senior associate Lee Hardy believes people are choosing to rent for other reasons.
He said: “We are seeing that renting is becoming a lifestyle choice for the ‘millennial’ generation. There isn’t as much societal pressure to get on the property ladder as in the past. Candleriggs Court and Mitchell Apartments were fully tenanted, mainly by young professionals, within a couple of months since launch. Renting gives people the flexibility to move on relatively quickly without having a ‘tie’ to an owned property. Another appeal to millennial renters is the money saved by not incurring legal fees or maintenance costs.
With the increased demand for property outweighing supply on the sales market, it is almost inevitable that in time, it will become more expensive to buy than to rent. Couple this with the quality of rental property increasing year on year, renting should become more appealing. With current costs to buy appearing much lower, this suggests a pivotal time to purchase a buy-to-let property for potential investors in Scotland.”
The demand for rental properties
In the past 15 months, Tay has experienced significant demand for high quality rentals – which is encouraging news for investors. Even during COVID, average rental prices continued to rise to an average rental price of £1135 across a portfolio of 1150 properties.
Lee continued: “There are a whole host of other reasons people are choosing to rent rather than buy, including lack of supply, the vast sums of money needed to acquire a property, increased rates and withdrawal of many high loan-to-value mortgages. As demand for property increases, this will push the rental prices up. This has been demonstrated over the year on year growth of 4.5% in the [Glasgow] city average, over the last 4/5 years.
For cash buyers, this is a great time to buy. A cash buyer is clearly an attraction to any seller due to the fact that it is not reliant on a sale or mortgage and can often result in quicker completion. With no shortage in tenant appetite, your return on investment can begin very quickly.
The ability to sell and take advantage of the prices achieved due to the significant demand to buy can’t be ignored. Rather than investors ploughing money straight back into another purchased property, some are choosing to rent for a period of time. This can help determine whether the market slows down and the inflated prices to secure properties eases. This allows for investors to use profit made to secure the best possible property that budget allows.”
If you’re looking for advice on your next move, get in touch to discuss how Tay Invest can assist.