An important factor to consider when thinking about buy-to-let investment is the affordability of property in your chosen area. One way of judging the affordability of a town is by simply finding the ratio of the average property price to the average salary. The lower the ratio, the more affordable property is.
We put this to the test. In the latest Registers of Scotland Quarterly House Price index, published in July, we found that Glasgow currently has an average property value of around £138,000 with an average salary (based on ONS data) of £24,428. This gives a respectable ratio of 1 to 5.7. Meanwhile in neighbouring East Renfrewshire, the ratio of property values to salary is 1 to 7.0, which suggests the property in Glasgow is 19% more affordable than in East Renfrewshire.
We also had a look at Edinburgh and found the average salary is £28,820 compared to an average property value of £237,286, giving a ratio of 8.2. Glasgow also comes out more affordable on this metric against Aberdeen which has a ratio of 7.6.
Unsurprisingly, London scores an eye watering 13.0 on this scale, with average house prices of £472,900 vs average salaries of £36,387. It does make me wonder how sustainable prices are in London.
So given Glasgow’s affordability, combined with Glasgow being the commercial hub of Scotland and the Scottish economy returning to strong growth (GDP +2.6% in 2015 Q1 vs previous year), could mean that now is a good time to invest in the Glasgow property market.
If you want to chat about this or any other property related matter, please feel free to contact me on 07984 619 124 or via email: derek.livingstone@douglasdickson.co.uk.
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