Renting Property Now Cheaper Than Buying

Research by Hamptons Estate Agency suggests it is cheaper to rent a property than to buy your first home for the first time in 6 years.

Early in 2020 it was cheaper to buy a property than to rent in the UK.  In March 2020 before the pandemic, people buying with a 10% deposit where better off than renters by £102.00 per month.

In May 2021, the private sector tenant was better off by an average £71.00 per month less in rent.

The 4 areas in the UK where buying is still cheaper than renting are:

• North East
• North West
• Yorkshire and Humber
• Scotland

This contrasts with May 2020 where rental demand fell as younger adults returned to their family homes during the pandemic with work and leisure restrictions making city living less attractive.

Despite a 7.1% rise in average rents in the last 12 months, together with strong house price growth and an increase in the loan-to-value (LTV) mortgage rates availaibility, this has added to the cost of buying and owning a home says Hamptons.

A typical first-time buyer is now finding it cheaper monthly to rent rather than buy a property.  The average monthly amount spent on rent being £1,054 compared to £1,125 on mortgage repayments, this is the first-time renting has been cheaper than buying since December 2014.

Since the pandemic London has seen the largest shift.  A buyer putting down 10% deposit on a property will have gone from being £123 a month better of buying in March 2020 to spending £251 a month less on rent in May 2021, the report states.

Not included in the report are other financial and practical factors which potential first-time buyers consider when deciding to buy rather than rent or vice versa.

Areas where it is cheaper or more expensive to rent:

• Greater London - £251 cheaper
• East - £117 cheaper
• South West - £108 cheaper
• East Midlands - £98 cheaper
• South East - £54 cheaper
• West Midlands - £35 cheaper
• Wales - £11 cheaper
• North West - £4 more expensive
• Yorkshire and the Humber - £5 more expensive
• North East - £72 more expensive
• Scotland - £130 more expensive

Comment

Property, like all investments moves in cycles and where it becomes cheaper to rent rather than buy demand will eventually fall away and property prices will adjust downwards until they become affordable for younger people again.  Expect more property prices increases in the short term but then a correction downwards before the cycle starts again.