Owning a home beats renting one in 84% of British towns
26th June 2012
The cost of home ownership is cheaper than renting in 42 of the top 50 (84%) towns and cities in Britain, according to property website Zoopla.co.uk. This figure is up on one year ago when it was cheaper to service a mortgage rather than pay rent in 80% of towns across the country.
The ongoing shortage of accessible mortgages and the fall in wages in real terms has created difficulties for first-time buyers resulting in a rise in demand for rental properties and pushing up average rents up across Britain. It now costs an average of 14% more per month to rent a home compared to servicing a mortgage on an equivalent property.
The average rent across Britain now stands at £1,785 per calendar month - up 2.7% since February. Milton Keynes, Dundee and Stoke-on-Trent top the list of places where owning beats renting by a large margin. At the other end of the spectrum, in Aberdeen, Bournemouth and Swansea renting is by far the better option from a cost perspective.
In London, renting is 21% more costly on average than servicing a mortgage with the average asking price for a 2-bedroom flat in the capital currently at £474,979 and the average rent on an equivalent property at £2,500 per month. With an interest-only mortgage at 5% p.a., owners are £6,250 per year better off than renters in the capital.
Nicholas Leeming, business development director of Zoopla.co.uk, commented: “The climbing cost of renting is exacerbating the problems the property market currently faces. Higher rental costs leave less disposable income for renters to save for deposits. The problem will only ease if rental prices fall or mortgage availability improves dramatically, leaving the ball is firmly in the court of Britain’s lenders.”
Locations where renting rules over buying
| Rank | Location | Avg. Monthly Rent* | Avg. Asking Price* | Rental Premium** |
|---|---|---|---|---|
| 1 | Milton Keynes | £763 | £132,967 | 38% |
| 2 | Dundee | £516 | £90,880 | 36% |
| 3 | Stoke-on-Trent | £524 | £92,746 | 36% |
| 4 | York | £858 | £152,188 | 35% |
| 5 | Preston | £550 | £98,980 | 33% |
| 6 | Bolton | £537 | £98,433 | 31% |
| 7 | Nottingham | £628 | £115,835 | 30% |
| 8 | Bradford | £503 | £93,321 | 29% |
| 9 | Derby | £568 | £105,415 | 29% |
| 10 | Wolverhampton | £503 | £94,426 | 28% |
Source: Zoopla.co.uk
* Based on 2 bedroom flats on the market for sale/rent in May 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 | Aberdeen | £802 | £229,023 | -16% |
| 2 | Bournemouth | £750 | £211,836 | -15% |
| 3 | Swansea | £646 | £180,787 | -14% |
| 4 | Oldham | £498 | £131,482 | -9% |
| 5 | Plymouth | £598 | £155,648 | -8% |
Source: Zoopla.co.uk
* Based on 2 bedroom flats on the market for sale/rent in May 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 -
For further information, please contact PR Team on pr@zoopla.co.uk or +44 (0)20 3873 8770.
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