Buying now cheaper than renting across 90% of Britain
September 28, 2011 at 10:56 AM Lawrence Hall 6 comments
Average renter pays 13% more than an owner with a mortgage at 5% p.a
With house prices down, low interest rates and sky high demand in the private rental sector, buying has never been a better option for those able to secure a mortgage. Couple this with owners reducing prices further in order to achieve a sale before Christmas, there may well not have been a better time to buy in recent times.
Falling house prices and increasing rental demand has made it cheaper to buy a property than to rent one in 45 of the 50 largest towns across Britain. The cost of renting is now 13% higher on average than the cost of owning, according to our latest Rent v Buy Index.
We analysed the asking prices and rents for all two-bedroom flats currently on the market, comparing the rental cost to the cost of ownership based on servicing an interest-only mortgage at 5% p.a (see methodolgy below).
Milton Keynes topped the list of locations where buying beats renting with current rents more than 39% higher than the cost of owning, leaving renters on average £2,544 per year worse off. At the other end of the scale, renting remains more cost-effective in Aberdeen, where it costs 9% more to own compared to rent, leaving owners on average £936 worse off.
In London, where the average asking price for 2-bedroom flats currently stands at £430,608, buying still beats renting by a significant margin. The average monthly rent in the capital today is 28% higher than the cost of ownership, leaving renters paying an extra £5,964 annually compared to owners.
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 5 locations where renting beats buying
| Rank | Location | Avg. Monthly Rent* | Avg. Asking Price* | Rental Discount** |
|---|---|---|---|---|
| 1 | Aberdeen | £809 | £212,941 | -8.8% |
| 2 | Swansea |
£669 | £167,234 | -4.0% |
| 3 | Cambridge |
£992 | £246,551 | -3.0% |
| 4 | Plymouth |
£626 | £155,353 | -3.3% |
| 5 | Oldham | £507 | £125,012 | -2.6% |
Source: Zoopla.co.uk
* Based on 2 bedroom flats on the market in August 2011
** % variance between monthly rent and interest-only mortgage payment at 5% pa
Top 5 locations where buying beats renting
| Rank | Location | Avg. Monthly Rent* | Avg. Asking Price* | Rental Premium** |
|---|---|---|---|---|
| 1 | Milton Keynes | £760 | £131,630 | 39% |
| 2 | Birmingham |
£731 | £131,118 | 34% |
| 3 | Northampton |
£586 | £105,996 | 33% |
| 4 | Warrington |
£577 | £104,996 | 32% |
| 5 | York |
£871 | £161,769 | 29% |
Source: Zoopla.co.uk
* Based on 2 bedroom flats on the market in August 2011
** % variance between monthly rent and interest-only mortgage payment at 5% pa
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.
Methodology
• Mortgage payments are calculated assuming a conservative mortgage rate of 5% p.a. to provide an effective comparison to renting.
• We use an interest-only mortgage rate in the comparison as the interest on a mortgage is the effective cost of financing living in that home.
• We assume a 100% LTV ratio to do a fair and simple comparison of the cost of financing versus the cost of rent.
Entry filed under: House Prices, Property to rent. Tags: .
6 Comments Add your own
Why not leave us a comment or share this with the buttons above?
Trackback this post | Subscribe to the comments via RSS Feed
1.
Emily | October 7, 2011 at 11:50 AM
Now potential buyers can get onto the property ladder much sooner with companies like Arun estates who are introducing 100% mortgages. This gives buyers the opportunity to get onto the property ladder a lot sooner than previously. I have found a link for Pittis who are also offering this 100% mortgage in case anybody finds it useful.
http://ptts.co/rpjSCd
2.
Christina Latham | October 11, 2011 at 1:15 PM
It is amazing how much the property market can change over time and how it is set to change. However, for buyers this is definitely an advantage that they should grasp with both hands. Thanks for the figures.
Christina
3.
Estate Agents Cardiff | October 20, 2011 at 9:03 AM
The property maret is in complete flux at the moment. We’ve seen house prices rise, fall and rise again all in the past few months, and this news does not surprise me at all.
I just hope this means more people can get onto the property ladder!
4. Making sense of the senseless – a balanced overview | Miller Homes UK | October 28, 2011 at 2:28 PM
[...] afford to buy right away and saving takes time, I admit, but I wouldn’t hold your breath for the rent vs. price index to change in the foreseeable future [...]
5.
John Helfrich | February 7, 2012 at 2:49 PM
I’m still surprised to see how different our property (real estate) markets are. I’m an estate agent (we say ‘real estate agent’) in Toronto, Canada. Even after all the turmoil in the world markets, we still have a Sellers market for property, just the opposite of yours.
In fact, even with historic low interest rates, the cost of owning a C$ 650,000 property would be around $4,000 per month compared to a rental cost of about $2,600 per month. And people are still lining up to buy them.
6.
sunny | October 17, 2012 at 7:00 AM
It’s really shocking for me to see the variations of our property in the market now a days…
Really great contribution by Lawrence Hall…
the Letting-links will provide best services to you go through it.
Houses For Rent