Blogs

Owning a home is more than £1,000 a year cheaper than renting

Alex Johnson

84612abc8a374cf8357ff13b9befe8de8202cbb5 300x199 Owning a home is more than £1,000 a year cheaper than rentingHomeowners save £1,098 on average compared to renters, according to new research by property website Zoopla.  The property website estimates that the average rent of a two-bedroom flat across the UK is £8,258 per year, £1,098 more than the cost of servicing a 5% interest-only mortgage on a similar property (£7,160).

By their reckoning, renting is now the cheaper option in only six of the 50 largest towns and cities.

Reading heads the list of places where buying is most cost-effective – owners there pay 34% less than renters on average. Looking at it the other way round, Swansea is top of the list in terms of renting beating owning, with renters paying 11% less on average.

Renting in London also appears to now be a better option than buying because of the increase in house prices. London renters now save 9.5% per year over buyers.

The figures come as Halifax released figures this morning showing that house prices in the last three months were 2% higher than in the previous three. Martin Ellis, housing economist at Halifax, said: “Housing demand has risen more quickly than supply in recent months, putting upward pressure on prices. There are signs that supply is beginning to respond to the pick-up in demand, which if continued should help to constrain the upward pressure on prices. The recent strengthening in house prices is increasing the amount of equity that many homeowners have in their home, enabling more to put their property on the market for sale. Levels of housebuilding are also increasing, albeit from a very low base.”

Lawrence Hall of Zoopla.co.uk, one of the Independent’s partners, said: “Despite the improved first-time buyer market over the past year, demand for rental accommodation is still fierce. Thousands of people who want to buy are still being forced into the private rented sector every month, which is pushing rents up. Provided you can get a mortgage, buying is generally the more cost effective option – particularly in the north, where house prices are lower and rising at slower rate than in the south.

“However, if property prices continue to increase quickly the tables may turn and monthly rent payments could become cheaper than the cost of servicing a mortgage. That has already happened in London, where house prices rises have pulled away from the rest of the country and are rising at a faster pace than rental costs, which has now made renting the cheaper option.”

TOP 5 LOCATIONS WHERE BUYING BEATS RENTING

Rank Location Avg. Monthly Rent* Avg. Asking Price* Owner Discount**
1 Reading £1,205 £190,465 -34.1%
2 York £1,057 £168,498 -33.6%
3 Peterborough £637 £103,579 -32.2%
4 Aberdeen £1,187 £197,496 -30.7%
5 Hull £490 £84,143 -28.4%

TOP 5 LOCATIONS WHERE RENTING RULES

Rank Location Avg. Monthly Rent* Avg. Asking Price* Rental Discount**
1 Swansea £637 £171,836 -11.0%
2 London £2,444 £648,490 -9.5%
3 Bournemouth £823 £209,261 -5.6%
4 Bedford £576 £142,868 -3.2%
5 Middlesbrough £507 £122,919 -1.0%

Pictured is ‘Zero House’, a 5 bedroom detached house for sale at Clifton Green, York, on with Blenkin & Co at a guide price of £995,000


Most viewed

Property search
Browse by area

Latest from Independent journalists on Twitter