Buying still beats renting across 84% of Britain
Cheaper to service a mortgage than to rent in 42 of Britain’s top 50 towns
Down from 94% just three months ago
Renting is now 16% more expensive on average than owning across Britain
Renters in London pay £6,687 more on average per year than homeowners
The cost of servicing a mortgage is now cheaper than renting in 42 of the top 50 (84%) towns and cities in Britain, according to property website Zoopla.co.uk. 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 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.
Nicholas Leeming, business development director of Zoopla.co.uk, commented:“Despite a recent increase in first-time buyer activity, demand from renters 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 as it ever has been. However many buyers are still unable to take advantage of these conditions because of their inability to secure a mortgage.”
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 Premium** |
|---|---|---|---|---|
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.
- Ends -
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