Buying still beats renting across 84% of Britain

March 19, 2012 at 9:46 AM 3 comments

Renting is now 16% more expensive on average than owning across Britain

Despite a recent increase in first-time buyer activity, demand remains strong and is keeping rental levels at historic highs. This, along with historically low borrowing costs, makes it as good a time to buy property as it ever has been. However many buyers are still unable to take advantage of these conditions because of their struggle to secure a mortgage.

Our latest Rent v Buy research shows that the cost of servicing a mortgage is now cheaper than renting 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 towns.

Despite the fall over the last quarter, buying remains cheaper than renting a property today across the vast majority of the country and it is cheaper to buy now than rent in more locations than at the same time last year. The shortage of mortgages and difficulties faced by first-time buyers in securing a deposit has increased demand for rental property and led to renting in Britain now costing 16% more on average than buying, up from 11% this time last year.

The average monthly rent in Britain has come down slightly by £9 on average over the past 3 months to £1,470 per month in February 2012. Meanwhile asking prices have dropped by £6,500 on average over the same period to £255,037.

Swansea, Oldham and Cambridge top the list of places where it currently still pays to rent rather than buy with rental discounts ranging from 4.6% to 8.4%. In contrast, it make most sense to buy in Milton Keynes where renting is 38.8% more expensive than servicing a mortgage, leaving renters £2,580 per year worse off on average. York and Preston also offer buyers better deals to buy than rent with renters paying around a third more on average in both places.

In London, despite the high cost of buying, it still beats renting with the average asking price for a 2-bedroom flat in the capital currently at £452,387, while the average rent for an equivalent property is £2,422 per month, making renting 29.6% more expensive than owning on average.

Locations where renting rules over buying

Rank Location Avg. Monthly Rent* Avg. Asking Price* Rental Discount**
1 Swansea £676 £177,100 -8.4%
2 Oldham £497 £126,447 -5.6%
3 Cambridge £1,033 £260,029 -4.6%
4 Bournemouth £757 £189,280 -4.0%
5 Liverpool £598 £145,581 -1.4%
6 Aberdeen £846 £205,618 -1.2%
7 Huddersfield £495 £120,049 -0.9%
8 Plymouth £601 £144,862 -0.4%

Source: Zoopla.co.uk

* Based on 2 bedroom flats on the market for sale/rent in February 2012

** % 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. Monthly Rent* Avg. Asking Price* Rental Discount**
1 Milton Keynes £770 £133,141 38.8%
2 York £856 £154,176 33.2%
3 Preston £550 £99,838 32.3%
4 Northampton £589 £107,314 31.7%
5 Birmingham £701 £128,170 31.3%
6 Walsall £497 £91,098 30.9%
7 London £2,442 £452,387 29.6%
8 Bradford £482 £89,923 28.5%
9 Swindon £587 £109,912 28.2%
10 Warrington £571 £106,987 28.0%

Source: Zoopla.co.uk

* Based on 2 bedroom flats on the market for sale/rent in February 2012

** % variance between average monthly rent and average monthly cost of 5% p.a. interest-only mortgage

Methodology

  • To compare the cost of buying versus renting, Zoopla analysed the current asking prices and rents of over 84,000 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.
  • Mortgage payments are calculated assuming a 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.

As always, please feel free to share and use this research, all we ask is that you credit the source as Zoopla.co.uk and link to Zoopla.co.uk. Thank you.

Follow Zoopla on Twitter
Like Zoopla on Facebook

Entry filed under: Rent Buy Index. Tags: , , .

How to find a property to rent for the London 2012 Olympics period Home alone: What’s the cost?

3 Comments Add your own

  • 1. Paul  |  March 29, 2012 at 2:46 PM

    Hi Lawrence, very interesting read thank you, i was wondering whether or not you had a complete table for all the 50 towns researched?
    I am writing a paper for my degree that in part compares renitng prices with mortgages and would like to reference your research as part of that.
    Regards, Paul

    Reply
  • 2. Susan  |  April 19, 2012 at 3:02 PM

    This is useful and ties in with our experience at The Good Schools Guide Advice Service. Families who move need to find new schools for their kids. You can’t get into a school until you have an address. And you can’t buy a house in five minutes. So – rent somewhere as close as you can to the school you like. Then – once you’ve secured a school place, buy!

    Reply
  • 3. Clare  |  July 13, 2012 at 11:53 AM

    Clare
    Hello, would it be possible to have the complete list of all 50 towns researched, please?
    Thanks

    Reply

Why not leave us a comment or share this with the buttons above?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Zoopla Mobile & Tablet Apps

Grab the App

Zoopla.co.uk

Search over 1 million properties for sale or to rent on our site from more than 18,000 agents and developers, including all of the UK's leading names.

Posts delivered hot and fresh to your inbox. Signup for free to subscribe, (No spam... ever) and join over 16,000 others.

Enter your email address below:

Recent Posts

Follow Zoopla

Archives

About the Zoopla blog

The Zoopla property blog is maintained and edited by the Web Content Editor @ Zoopla Property Group Ltd Myra Butterworth.

Follow

Get every new post delivered to your Inbox.

Join 544 other followers

%d bloggers like this: