Buying a Home Is 7% Cheaper Than Renting; BUT DIFFICULTY OF RAISING A DEPOSIT STOPS PEOPLE BUYING

Western Mail (Cardiff, Wales), September 19, 2012 | Go to article overview

Buying a Home Is 7% Cheaper Than Renting; BUT DIFFICULTY OF RAISING A DEPOSIT STOPS PEOPLE BUYING


Byline: RHODRI EVANS Assistant Business Editor rhodri.evans@walesonline.co.uk

BUYING a home in Wales is, on average, 7% cheaper than renting, according to latest figures from the Halifax.

The bank's Buying vs. Renting Review for June found that the average monthly costs for those buying a home in Wales was PS455. In comparison the average cost for those renting was PS490.

Across the UK the study found that the average cost of buying a home is now almost a fifth lower than renting. The average monthly costs associated with buying a three bedroom house stood at PS600 in June 2012; PS132 (or 18%) lower than the typical monthly rent of PS732 paid on the same property type.

In 2011, the monthly cost associated with home buying was PS78 (11%) lower than renting. Over the past year, buying costs have dropped by 3%, while the cost of renting has increased by 5%.

In contrast, in 2008 the average home buying costs (PS1,048) were 45% (or PS324) more than the average monthly rent paid (PS724).

The study suggests the substantial improvement in the affordability of buying relative to renting largely reflects a 43% drop in home buying costs since 2008; caused by a marked fall in both house prices and mortgage rates.

The average mortgage rate for a new borrower has fallen by more than two percentage points 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 UK house price has decreased by a tenth. In contrast, the typical rent paid has risen by 11% (PS72) since 2010.

The study found that monthly home buying costs currently account for less than a third (29%) of average UK disposable income, down from over half (54%) in 2008.

Home buying costs in 2012 also account for a smaller proportion of average UK disposable income than rental payments (29% against 35%).

However, despite the improvement in affordability, the number of buyers in the UK housing market has fallen significantly over the last four years. There were 535,200 buyers (with a mortgage) in the 12 months to June 2012; a third lower than the same period in 2008 (793,600).

More than half the respondents to the survey highlighted the challenge of raising a deposit (58%) and concerns about job security (56%) as the main barriers to buying a home. Home buyers - both first-time buyers and those moving up the property ladder - put down an average deposit of PS40,526 in June 2012, equivalent to a quarter (25%) of the property price. The average deposit required has risen by 68% (PS16,387) over the past decade from PS24,140 in June 2002.

Martin Ellis, housing economist at Halifax, 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 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 as rents have risen in the past two years."

"Despite the improvement in buyer affordability, the housing market nationally continues to tread water," he added. …

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