Zoopla News - Renting is cheaper than buying?
What's the latest?
Renting a home is now cheaper than buying one in more than half (54%) of British cities, according to the latest data from Zoopla.
The average monthly rental payment on a two-bedroom home across Britain's 50 cities rings in at £690 – that's £47 cheaper than the average mortgage repayment of £737.
(Mortgage repayments are based on loans of 90% of the average value of a two-bedroom home in the city payable at an interest rate of 4.5%.)
The research found that Londoners fare best when it comes to renting, paying 47% less (£1,861) than the average mortgage payment (£3,001) in the capital.
Why is this happening?
The proportion of locations where it's now cheaper to rent a home than to buy one has increased by 14% since October 2016 which is the last time Zoopla ran the numbers. Then, it was more cost-effective to rent in just 40% of British cities.
However Zoopla spokesperson, Lawrence Hall issued a note of caution on the findings. He said: "It's important to remember that, while renters may be better off in the short-to-medium term in some areas of the country, buying a property is a long-term investment.
"And, with most buyers opting for mortgage terms of 25 years, buyers are likely to be better off overall compared to those who choose to rent."
image: https://st.zoocdn.com/zoopla_static_cms_content_cms_document_assets_(458464).jpeg
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Above: A two-bedroom home up for rent in Cambridge for the average monthly cost of £1,099
Who does it affect?
Londoners save the most in the rent-versus-mortgage scenario, forking out nearly 50% less than the average mortgage repayment each month.
Renting also financially trumps buying in Cambridge (saving 30%), Brighton (27%), Reading (26%), Bedford (24%), Liverpool (23%), Southampton (20%), Bristol (16%), Oldham and Bournemouth (both 14%).
However, the better value of renting demonstrated here is most comparable to first-time buyers, as many existing homeowners will have more than 10% equity in their property and will be paying mortgage rates of less than 4.5%.
Sounds interesting. What's the background?
The situation was reversed in other parts of the country, where buying a home was found to be cheaper than renting. It was most stark in Glasgow where servicing a mortgage is 31% (£174) cheaper than paying monthly rent.
Next was Dundee where it costs 29% less (£549) each month to service a mortgage rather than rent.
On the flipside, Yorkshire is an ideal county to buy a home in. Bradford, Barnsley and Leeds, all cities within the county, rank within the top 10 locations where buying is cheaper than renting.
Top 3 takeaways
- Across British cities, renters pay an average £47 less each month than buyers
- Renting is most cheap versus buying in London, Cambridge and Brighton
- Buying is most cheap versus renting in Glasgow, Dundee and Coventry
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Top 10 locations where renting beats buying: | |||||
Rank | City | Average monthly rent | Average asking price of 2-bed home | Average mortgage repayment (based on 90% loan) | Buying premium |
1 | LONDON | £1,861 | £599,950 | £3,001 | -47% |
2 | CAMBRIDGE | £1,099 | £297,498 | £1,488 | -30% |
3 | BRIGHTON | £1,199 | £315,000 | £1,576 | -27% |
4 | READING | £1,000 | £260,000 | £1,301 | -26% |
5 | BEDFORD | £764 | £195,000 | £975 | -24% |
6 | LIVERPOOL | £623 | £156,750 | £784 | -23% |
7 | SOUTHAMPTON | £779 | £189,750 | £949 | -20% |
8 | BRISTOL | £900 | £210,995 | £1,056 | -16% |
9 | OLDHAM | £476 | £109,950 | £550 | -14% |
10 | BOURNEMOUTH | £848 | £194,975 | £975 | -14% |
Source, Zoopla April 2017
Top 10 locations where buying beats renting: | |||||
Rank | Location | Average monthly rent | Average asking price of 2-bed home | Average mortgage repayment (based on 90% loan) | Rental Premium |
1 | GLASGOW | £649 | £95,000 | £475 | 31% |
2 | DUNDEE | £549 | £82,000 | £410 | 29% |
3 | COVENTRY | £775 | £125,000 | £625 | 21% |
4 | BRADFORD | £493 | £79,998 | £400 | 21% |
5 | BARNSLEY | £450 | £75,000 | £375 | 18% |
6 | LEEDS | £736 | £125,000 | £625 | 16% |
7 | MIDDLESBROUGH | £497 | £84,950 | £425 | 16% |
8 | BOLTON | £493 | £85,000 | £425 | 15% |
9 | BIRMINGHAM | £749 | £130,000 | £650 | 14% |
10 | WALSALL | £523 | £91,000 | £455 | 14% |
Source, Zoopla April 2017
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