Buying beats renting in 94% of UK towns
December 15, 2011 at 3:47 PM Lawrence Hall 5 comments
Renting now 15% more expensive than owning on average across Britain
Our latest research shows buying a property is more cost-effective than ever compared to renting, however many potential buyers aren’t able to take advantage because they can’t access mortgage finance. The shortage of financing, especially to first time buyers, has pushed demand for rental property through the roof. But for those lucky enough to be in a position to get a mortgage, there may never have been a better time to buy.
Our latest Rent v Buy Index shows:
- Buying property more attractive than it has ever been compared to renting
- Renting now 15% more expensive than owning on average across Britain
- Swansea, Plymouth and Bournemouth only places where renting rules
- Renters in London pay £6,888 p.a more on average than homeowners
High rental demand, due to the difficulties would-be buyers face in getting financing, coupled with low mortgage rates has made buying property in Britain more attractive today than it has ever been in comparison to renting. Buying now beats renting in 47 of the 50 largest towns across the country, according to our latest analysis.
The figures also show a significant increase on this time last year, when it was better to buy than rent in only 40 out of the same 50 towns. The continued mortgage drought and the rising demand for rental properties has led to renting now costing 15% more on average than buying, up from only 10% more this time last year.
Swansea, Plymouth and Bournemouth are the only 3 locations on the list of 50 towns where it remains cheaper to rent than buy today. In contrast, Milton Keynes comes top of the list of locations where buying beats renting and where renting is 36% more expensive than owning, leaving renters £2,436 per year worse off on average. Warrington and Walsall also feature highly on the list of locations where it is cheaper to buy than rent, at 33% and 32% rental premiums respectively.
In London, where the average asking price for 2-bedroom flats currently stands at £442,036, buying also trumps renting by a big margin. With average monthly rents in the capital at £2,416, renting is 31% more expensive than the cost of ownership, leaving renters paying an extra £6,888 annually on average compared to owners.
Full list of the top Zoopla.co.uk 50 rent/buy locations
To compare the cost of buying versus renting, Zoopla analysed the current asking prices and rents of over 78,000 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.
Locations where renting rules over buying
| Rank | Location | Avg. Monthly Rent* | Avg. Asking Price* | Rental Discount** |
|---|---|---|---|---|
|
1 |
Swansea |
£653 |
£172,871 |
-9.3% |
|
2 |
Plymouth |
£618 |
£158,693 |
-6.6% |
|
3 |
Bournemouth |
£756 |
£192,456 |
-5.7% |
- Source: Zoopla.co.uk
- * Based on 2 bedroom flats on the market for sale/rent in November 2011
- ** % variance between monthly rent and interest-only mortgage payment at 5% pa
Top 10 locations where buying beats renting
| Rank | Location | Avg. Monthly Rent* | Avg. Asking Price* | Rental Discount** |
|---|---|---|---|---|
|
1 |
Milton Keynes |
£756 |
£133,217 |
36% |
|
2 |
Warrington |
£601 |
£108,604 |
33% |
|
3 |
Walsall |
£507 |
£92,031 |
32% |
|
4 |
Coventry |
£582 |
£105,850 |
32% |
|
5 |
Northampton |
£587 |
£106,925 |
32% |
|
6 |
York |
£866 |
£158,127 |
31% |
|
7 |
London |
£2,416 |
£442,036 |
31% |
|
8 |
Wolverhampton |
£505 |
£92,590 |
31% |
|
9 |
Swindon |
£597 |
£110,574 |
30% |
|
10 |
Birmingham |
£706 |
£130,937 |
29% |
- Source: Zoopla.co.uk
- * Based on 2 bedroom flats on the market for sale/rent in November 2011
- ** % variance between monthly rent and interest-only mortgage payment at 5% pa
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: Rent Buy Index. Tags: buying a property, first time buyers, mortgage rates.
5 Comments Add your own
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1.
Jess Stevens | December 19, 2011 at 9:03 AM
Buying a property abroad or locally in UK is always cost-effective than renting a house, flats, villas etc, besides this we can’t also deny the fact that London Olympic 2012 may badly affect the present renting and owning rate, isn’t it?
2.
darlington property maintenance | December 22, 2011 at 10:16 PM
interesting read thank you
3.
Steve Flatley | January 19, 2012 at 4:02 PM
This is a really interesting study. The problem is that in most cases young people who would like to get on the property ladder are stifled by the banks reluctance to offer a mortgage with a decent rate. This leads to young people being forced to rent and throw money down the drain. Is the increased price in renting down to this factor?
4.
cardiffliving | February 18, 2012 at 1:46 AM
Brilliant news for private sector landlords, not so much for everyone else
5. Buying still beats renting across 84% of Britain « Zoopla.co.uk Blog | March 19, 2012 at 9:46 AM
[...] in 42 of the top 50 (84%) towns and cities in Britain. This figure represents a slight drop from three months earlier when was cheaper to buy than rent in 47 of the top 50 [...]