Top 50 places to rent or buy, according to Zoopla.co.uk
March 8, 2011 at 2:17 PM Lawrence Hall Leave a comment
Average renter pays 10.5% more than an owner with a mortgage at 5% p.a
While lenders maintain their vice-like grip on the mortgage market, more and more would-be buyers are forced into property to rent instead of trying to get onto the housing ladder. Consequently, rents will likely rise further as a result and renters will continue to pay a significant premium for being stuck in the sector.
Our latest research shows, that buying a property wins out over renting today, however the impact of a possible rise in interest rates cannot be ignored. If interest rates were to increase by 1% and rents were to remain the same, renting would become more cost-effective in 78% of the locations studied.
Key findings:
- Average renter pays 10.5% more than an owner with a mortgage at 5% p.a.
- More cost-effective to own as opposed to rent in 8 of every 10 British towns/cities
- Milton Keynes better to buy not rent, but Plymouth better to rent rather than own
- Cost difference has been rising steadily since the middle of last year, when renting was 8.7% more expensive.
In some locations, the higher cost of renting is staggering. In Milton Keynes rents exceed average mortgage servicing costs by 42% – with average monthly rents at £785 Milton Keynes renters are left £2,772 a year worse off compared to owners. Completing the top 3 places where buying is far more cost-effective than renting are Walsall and Birmingham which each have a 38% and 35% rental premium respectively. A further nine of the largest 50 towns and cities have average rents that exceed mortgage payments by over 20%.
Several factors are behind the increased cost of renting. The severe shortage of mortgages has kept many potential first-time buyers in the rental market resulting in high tenant demand, while the combination of stagnant house prices and low-interest rates has reduced the monthly cost of home ownership.
Even in London, which has the highest asking prices in the country, buying is still the more cost-effective option. With an average rent of £2,252 per month in the capital, buyers stand to save £4,656 annually compared to renters.
However, there are still some locations where renting is more cost-effective than owning. In Plymouth, the average two-bed flat costs £581 per month to rent versus £156,435 to buy, leaving renting £71 a month cheaper than the average mortgage servicing cost. Following the buy-to-let boom with investors buying properties to rent out to the large student and military population, the extensive supply of rental property has put downward pressure on rents.
Please note: the research looks at the asking prices of two-bedroom flats currently for sale and to rent in the 50 largest cities and towns around the country and mortgage payments are calculated assuming an interest-only mortgage at 5% p.a. to provide an effective comparison to renting.
Full list of the top 50 Zoopla.co.uk places to rent or buy
Top 10 locations where renting beats buying
| Rank | Location | Avg. Asking Price | Avg. Monthly Rent | Rent vs Buy* |
|---|---|---|---|---|
| 1 | Plymouth | £156,435 | £652 | -10.9% |
| 2 | Huddersfield | £130,109 | £542 | -10.7% |
| 3 | Swansea | £178,455 | £744 | -10.2% |
| 4 | Aberdeen | £215,234 | £897 | -7.4% |
| 5 | Oldham | £135,445 | £564 | -5.9% |
| 6 | Edinburgh | £175,540 | £731 | -5.1% |
| 7 | Bournemouth | £184,773 | £770 | -4.7% |
| 8 | Bristol | £182,968 | £762 | -4.2 |
| 9 | Lincoln | £134,601 | £561 | -0.1 |
| 10 | Stockport | £140,777 | £587 | -0.1 |
Source: Zoopla.co.uk (Feb, 2011)
* % variance between average monthly rent and average monthly cost of 5% p.a. interest-only mortgage
Top 10 locations where buying beats renting
| Rank | Location | Avg. Asking Price | Avg. Monthly Rent* | Rent vs Buy* |
|---|---|---|---|---|
| 1 | Milton Keynes | £132,919 | £785 | 42% |
| 2 | Walsall | £89,683 | £514 | 38% |
| 3 | Birmingham | £129,350 | £725 | 35% |
| 4 | Reading | £184,592 | £1,030 | 34% |
| 5 | Derby | £105,537 | £557 | 27% |
| 6 | Northampton | £107,809 | £568 | 26% |
| 7 | York | £172,807 | £901 | 25% |
| 8 | Coventry | £106,680 | £553 | 24% |
| 9 | Preston | £107,128 | £547 | 23% |
| 10 | Peterborough | £112,600 | £567 | 21% |
Source: Zoopla.co.uk (Feb, 2011)
* % variance between average monthly rent and average monthly cost of 5% p.a. interest-only mortgage
As always, please feel free to share and use this information, all we ask is that you credit the source as Zoopla.co.uk and link to either Zoopla.co.uk/rentbuy or blog.zoopla.co.uk. Thank you.
Entry filed under: For sale, House Prices, Property to rent. Tags: .
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