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Buying still beats renting across 84% of Britain

16th March 2012

  • Cheaper to service a mortgage than to rent in 42 of Britain’s top 50 towns
  • Down from 94% just three months ago
  • Renting is now 16% more expensive on average than owning across Britain
  • Renters in London pay £6,687 more on average per year than homeowners

The cost of servicing a mortgage is now cheaper than renting in 42 of the top 50 (84%) towns and cities in Britain, according to property website Zoopla.co.uk. This figure represents a slight drop from three months earlier when was cheaper to buy than rent in 47 of the top 50 towns.

Despite the fall over the last quarter, buying remains cheaper than renting today across the vast majority of the country and it is cheaper to buy now than rent in more locations than at the same time last year. The shortage of mortgages and difficulties faced by first-time buyers in securing a deposit has increased demand for rental property and led to renting in Britain now costing 16% more on average than buying, up from 11% this time last year.

The average monthly rent in Britain has come down slightly by £9 on average over the past 3 months to £1,470 per month in February 2012. Meanwhile asking prices have dropped by £6,500 on average over the same period to £255,037.

Swansea, Oldham and Cambridge top the list of places where it currently still pays to rent rather than buy with rental discounts ranging from 4.6% to 8.4%. In contrast, it make most sense to buy in Milton Keynes where renting is 38.8% more expensive than servicing a mortgage, leaving renters £2,580 per year worse off on average. York and Preston also offer buyers better deals to buy than rent with renters paying around a third more on average in both places.

In London, despite the high cost of buying, it still beats renting with the average asking price for a 2-bedroom flat in the capital currently at £452,387, while the average rent for an equivalent property is £2,422 per month, making renting 29.6% more expensive than owning on average.

Nicholas Leeming, business development director of Zoopla.co.uk, commented:“Despite a recent increase in first-time buyer activity, demand from renters remains strong and is keeping rental levels at historic highs. This, along with historically low borrowing costs, makes it as good a time to buy as it ever has been. However many buyers are still unable to take advantage of these conditions because of their inability to secure a mortgage.”

Locations where renting rules over buying

Rank Location Avg. Monthly Rent* Avg. Asking Price* Rental Discount**
1 Swansea £676 £177,100 -8.4%
2 Oldham £497 £126,447 -5.6%
3 Cambridge £1,033 £260,029 -4.6%
4 Bournemouth £757 £189,280 -4.0%
5 Liverpool £598 £145,581 -1.4%
6 Aberdeen £846 £205,618 -1.2%
7 Huddersfield £495 £120,049 -0.9%
8 Plymouth £601 £144,862 -0.4%

Source: Zoopla.co.uk

* Based on 2 bedroom flats on the market for sale/rent in February 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 Premium**
1 Milton Keynes £770 £133,141 38.8%
2 York £856 £154,176 33.2%
3 Preston £550 £99,838 32.3%
4 Northampton £589 £107,314 31.7%
5 Birmingham £701 £128,170 31.3%
6 Walsall £497 £91,098 30.9%
7 London £2,442 £452,387 29.6%
8 Bradford £482 £89,923 28.5%
9 Swindon £587 £109,912 28.2%
10 Warrington £571 £106,987 28.0%

Source: Zoopla.co.uk

* Based on 2 bedroom flats on the market for sale/rent in February 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 Tim Vooght at pr@zoopla.co.uk or on 020 3872 5615.

Notes to editors

Zoopla is the UK's most comprehensive property website, focused on empowering users with the resources they need to make better-informed property decisions. We help consumers both find their next home and research the market by combining hundreds of thousands of property listings with market data, local information and community tools.

At Zoopla we are fans of transparency and everything we do is aimed at making the market more efficient for both property consumers and advertisers alike. Zoopla has rapidly become the UK’s leading online destination for property consumers to search for homes and do their market research and the favoured online marketing partner for UK estate agents, letting agents and property developers.

Launched in 2008, Zoopla has since been one of the fastest growing websites in the UK, now attracting over 40 million visits per month and we are proud to have collected numerous awards and accolades along the way, including being named one of the Top 10 UK Tech Companies (Guardian) and one of the Top 10 Most Innovative UK Companies (Smarta).

Zoopla is part of Zoopla Limited which was founded in 2007.

Zoopla Limited, The Cooperage, 5 Copper Row, London, SE1 2LH
Registered in England and Wales with Company No. 09005884
VAT Registration number: 191 2231 33
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