Renting A Home Is Cheaper Than Buying For First Time In 6 Years

Renting A Home Is Cheaper Than Buying For First Time In 6 Years

With low interest rates and high rents, it has long been assumed that it is cheaper to buy than rent. But the tide has turned thanks to soaring house prices and lower rental demand, especially in the city centres.

According to leading estate agents, Hamptons, it has become cheaper to rent a property than buy a home for the first time in more than six years.

The estate agency research reveals that prior to the pandemic in March 2020, people buying with a 10% deposit would have been £102 a month better off than renters.

Last month, figures showed that the average private sector tenant was paying £71 a month less in rent.

This applies across the UK apart from four areas where it is still cheaper to buy than rent: the North East, North West, Yorkshire and Humber, and Scotland.

In May last year, rental demand dropped as younger adults and European workers returned to live with their families during the pandemic and work and leisure restrictions made city living less attractive.

Back in early 2020, it was cheaper to buy than rent in every region in the UK.

London’s sees the biggest shift since the start of the coronavirus pandemic.

Hamptons reports a 7.1% rise in average rents over the past 12 months, but also a strong house price growth coupled with increases in higher loan-to-value (LTV) mortgage rates have added to the cost of buying and owning a home.

This means a typical first-time buyer will find it cheaper to rent than buy on a monthly basis, with a monthly average of £1,054 spent on rent compared with £1,125 on mortgage repayments – the first time since December 2014 that renting has been cheaper than buying a home.

Plummeting rents there mean a buyer putting down a 10% deposit on a property in the capital will have gone from being £123 a month better off buying in March 2020, to spending £251 a month less on rent in May 2021, the report said.

There are many other financial and practical factors which potential first-time buyers will consider when deciding to rent rather than buy, or vice versa, which are not captured in this research.

In the long term, it is nearly always better to buy than rent. Rents will rise over time, whereas mortgages are paid off with ever devaluing paper money.

Buyers do pay for repairs and maintenance, but will benefit from long term growth and future equity in their property.

One major reason private renters want to buy is the long term security of tenure. Fear of buy-to-let landlord eviction, for instance when they want to sell the property, is obviously stressful for tenants.

Where and by how much is it cheaper to rent, than buy?

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

Source: BBC, Hamptons

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