Top 50 places to rent or buy, according to Zoopla.co.uk

March 8, 2011 at 2:17 PM 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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