It’s official! Renting is cheaper than buying…

It’s official! Renting is cheaper than buying…

New research released by Savills and Rightmove shows that renting is cheaper than buying, across all but two of the UK’s 376 boroughs.

These latest findings reveal that the common perception that it is cheaper to buy than rent (in the short term) is wrongly believed by 51% of renters and homeowners across the UK.

The recent statistics also show :

  • After capital repayments it is 21% (or £2,068 a year) more expensive to buy than rent the average two bedroom property in the UK and over a third more expensive to buy than rent in one in four locations across England and Wales (based on a 25% deposit).
  • It is 50% (or £5,006 a year) more expensive for a first time buyer with a deposit of just 10% to buy than rent the same 2 bedroom property.
  • In the first quarter of 2012 just 11% of homeowners with a mortgage were on interest only terms, a figure that falls to 3% for first time buyers.
  • It is more expensive to buy than rent across practically all Local Authority Districts in England and Wales once ownership costs are taken into account.  The only exceptions are the London Boroughs of Newham and Greenwich.
  • A recent Rightmove survey found that over three-quarters (78%) of consumers view property primarily as ‘a place to live’ and over half say ‘owning their property when they are older’ is the single most important reason to buy rather than rent.
  • But the wealth gap is widening between those unable to access home ownership and those who can enjoy the increased wealth that can be accumulated via house price growth.
  • Whilst there is now an opportunity to buy at or close to the bottom of the market in the next two years, the short term impact of higher buying costs is likely to prevent first time buyers taking advantage of that opportunity.
  • A recent Rightmove survey found that 56% of renters are ‘trapped’, wanting to buy but unable to afford to, with raising sufficient deposit the single biggest challenge for 33% of those looking to get on the housing ladder. Highlighting the affordability challenge of getting onto the housing ladder, 58% of intending first-time buyers are of the view that property prices in their area are above what is ‘fair and reasonable’.
  • Savills Research estimates that over the past 25 years house price growth has meant that owning a two-bedroom property has added an average £3,500 to a buyer’s overall wealth in the first year of ownership.

Lucian Cook, Director of Savills Global Research said “Much analysis of the relative cost of buying compared to renting does not take account of the costs of capital repayments. In the current lending environment a calculation on the basis of interest only borrowing – which makes a renting appear around 11% cheaper – is largely irrelevant.”

“Even for those lucky enough to have accumulated a sufficient deposit to allow them to buy in theory, in practice the additional annual cost will inevitably leave some would be first time buyers frozen out of home ownership.”

Director of Rightmove, Miles Shipside, went on to sayWhat continues to come across is that people still want to own the place they live, bring up their family and grow old in.  They also understand that home ownership offers lower lifetime housing costs.”

“But there is a lack of understanding about the relative costs of buying VS renting in the short term.  One in five in our survey admitted they did not know how to work this out. Given the shortage of rental accommodation in many parts of the UK and the consequent pain of rising rents, it’s understandable that more than half of people wrongly believe buying is the cheaper option to renting even in the short term.”

“In reality aspiring homeowners need to work out whether they are able and prepared to incur the short term additional costs of buying to put themselves in a position to benefit from the longer term gains and avoid the losses associated with lifetime renting. Buying has traditionally acted as both a hedge against rental inflation and a means of minimising housing costs in retirement  These issues will be stored up for increasing numbers of households confined to the private rented sector.”

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Author: Media Team

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